Above-the-counter currency-exchanges are still pretty heavily regulated by the Chinese government. See, the ongoing China scam works like this:
* traditional Chinese culture would have the children care for their parents and grandparents in their old age
* one-child policy means that each child has two parents and four grandparents to care for exclusively, so that's not going to work out so well, therefore:
* everyone saves like crazy
* the state-run banks pay negative real interest rates (less than inflation)
* the state-run banks loan to big state-owned firms at negative real interest rates (and you can do amazing things when paying for capital at negative interest rates)
* the people in charge of the state-owned firms live lavish lifestyles off the profits and provide political support for the regime
* from time to time the government has to work to suppress riots over high food prices and other consequences of inflation
This breaks down if the ordinary people can get hold of a currency that isn't full of inflation. So, capital controls limit how many dollars people can get a hold of.
Of course, Bitcoin in the mix could be interesting. Or rendered illegal. Or both.
Except people in China don't have to save money by putting it into a bank account. They find other ways to invest that beat inflation like people all over the world have to do. And currently in China, that's real estate.
Also, there is no practical limit to how much dollar you can get with yuan, it's called the grey market.
It's pretty astounding to me how Americans can still have such simplistic and misplaced views of how things works in other countries.
Entirely curious: has he posted that he is American before? Where are you getting that from, are are you generalizing about all Americans and not talking about the poster above?
Yes, I'm American. I'm also generalizing and simplifying because an in-depth analysis of the China scam is the proper subject of a Ph.D. thesis and not a HN comment. As lionspaw has noted, there are complicating factors like the property boom (/bubble) and the grey market for inflation-resistant currencies. These hamper the current capital controls but do not render them entirely useless.
> one-child policy means that each child has two parents and four grandparents to care for exclusively, so that's not going to work out so well
Some on-the-ground experience with China would indicate that the one-child policy has basically no effect on the number of children per couple. As would the international fertility stats.
Most recently, I asked a group of chinese software developers about the policy. They went around the table admitting they weren't only children.
My experience is the exact opposite. My wife and her brother are the only set of siblings among their cousins (of which there are money, because their grandparents had a massive quantity of children). The financial repercussions of disobeying the law are fairly severe, so people don't generally bypass it.
I wonder what the explanation could be for our radically different experiences. Mine is all around Beijing, is yours perhaps out somewhere less urbanized?
I wouldn't say that. My experience is all Shanghai.
Potentially it's an SES thing, but note that the fertility statistics show very low fertility for China, so a lot of only children isn't unusual overall. The conclusion that the one-child policy isn't having any effect comes from the fact that Japan and Korea have the same ultra-low fertility rate, but no one-child policy.
Japan and Korea seem like bad comparisons, since they're relatively rich. It's fairly well known (read: I don't feel like looking it up right now) that there's a strong negative correlation between wealth and birth rates. But I don't know what the right comparison would be (China is kind of incomparable) nor what the answer would be.
Perhaps the best comparison would be India, and the disparity in birth rates there is stark, but there are massive other differences as well.
* traditional Chinese culture would have the children care for their parents and grandparents in their old age
* one-child policy means that each child has two parents and four grandparents to care for exclusively, so that's not going to work out so well, therefore:
* everyone saves like crazy
* the state-run banks pay negative real interest rates (less than inflation)
* the state-run banks loan to big state-owned firms at negative real interest rates (and you can do amazing things when paying for capital at negative interest rates)
* the people in charge of the state-owned firms live lavish lifestyles off the profits and provide political support for the regime
* from time to time the government has to work to suppress riots over high food prices and other consequences of inflation
This breaks down if the ordinary people can get hold of a currency that isn't full of inflation. So, capital controls limit how many dollars people can get a hold of.
Of course, Bitcoin in the mix could be interesting. Or rendered illegal. Or both.