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CHINA'S FOREIGN EXCHANGE BLACK MARKET AND EXCHANGE FLIGHT: ANALYSIS OF EXCHANGE RATE POLICY
Author(s) -
Jianping DING
Publication year - 1998
Publication title -
the developing economies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.305
H-Index - 30
eISSN - 1746-1049
pISSN - 0012-1533
DOI - 10.1111/j.1746-1049.1998.tb00859.x
Subject(s) - china , library science , political science , computer science , law
HE foreign currency black market is a neglected area in research on the People’s Republic of China not only because of the lack of data availability and credibility but also because of its connection with the underground economy. The data used in this paper is based on sampling investigations of peddlers and vendors in Shanghai, and also on the World Currency Yearbook. This data was modified and adjusted by the Shanghai Institute of Asian Research (1993), Wang (1991), and other sources. Since the semiofficial exchange rate varied from place to place, the black market exchange rate also varied greatly among the coastal cities in China. Nevertheless, this does not have a great effect as long as the slope and tendency bears the features of the market. Although official data on the volume of transactions in the black market is usually not available on a systematic basis, formal and informal evidence suggests that the major sources within China of foreign exchange supply are smuggling, overinvoicing of imports and underinvoicing of exports, and from overseas Chinese remittances from abroad and border trading. Similarly, no direct information on the composition of foreign exchange demand in the black market is generally available. The existence of rationing in the official exchange market in China suggests, however, that the illegal demand for foreign currency arises for both current and capital account transactions. Unsatisfied demand at the official rate spills into the black market.