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Changing times

By Liu Weiling (China Daily)
Updated: 2008-07-14 16:27

Still, there were some Chinese people who could get some FECs from their overseas relatives or friends. They became the envy of their colleagues, neighbors and friends as owning FECs meant access to imported products which were usually not available.

Such privilege aroused concerns even among foreigners themselves. On September 11, 1980, the People's Daily published a letter from a professor from the Massachusetts Institute of Technology (MIT) who just completed his first visit to China. In the letter, he said that preferential treatment to foreign visitors made him feel uneasy. Such a system that allowed non-Chinese people to live, shop and eat in special places not open to ordinary Chinese people reminded him of the privileges granted to foreigners in the period when China clinched unequal treaties with foreign countries (in 19th century). He "strongly" suggested a re-consideration to the system.

Starck also called the two-money system a "confused" and "pernicious" one as it debased the official currency and encouraged the black market.

However, many local people still coveted FEC because it bought foreign goods and could be converted into real foreign currency like the US dollars. Starting from the 1980s, more and more Chinese people began to leave their country to study abroad or visit their relatives overseas, they needed hard currencies. Even students taking TOEFL (Test of English as a Foreign Lanugage) had to pay with foreign currency to take the exam.

Such a strong desire for FECs and greenbacks spurred the birth of a whole generation of street money changers throughout the country.

Money changers

"Change money? Change money?" This might be the most frequent greeting to foreigners walking alone in Beijing and other major tourism cities in China in the 1980s and early 1990s. Black market dealers, risking prison, found business opportunities from Chinese people's hunger for FECs and foreigners' desire for renminbi that could enable them to shop anywhere.

And the gap between the value of renminbi yuan and FECs made the business a profitable one - although it was illegal.

Before 1994, China had a dual-foreign exchange rate system. One was called the official rate set by the State Administration of Exchange Control, at about 5.8 yuan against $1 before 1994, and another one was market driven rate quoted in the swap market, at about 8.7 yuan against $1 then. Only about 20 per cent of hard-currency transactions were conducted at the official rate. The dual-rate system was abolished in January 1, 1994.

But before this, individuals could convert FECs back to hard currencies, like the US dollar, according to the official rate, but if people wanted to buy US dollars with renminbi, they had to go to the black market where the exchange rate was slightly higher than in the swap market which served only enterprises and trade companies. Normally, the exchange rate in the black market was around 9 yuan against $1 at the time.

Furtive deals had to be done in dark hutong, behind a wall, or in a market stall as both foreigners and Chinese looked over their shoulders to see if any police were nearby as the deal was struck. Completed, the money changer would go and convert the FECs into hard currencies and sell them to local people, while the foreigner was free to go and eat in local restaurants and shops with his illicit renminbi.

In 1993 before China reunified its dual-track foreign exchange rate system, black marketers usually paid 130 yuan for 100 FECs, according to earlier reports in the China Daily.

The illegal business was so hot and soon spread to across the nation. In busy shopping areas or outside tourist hotels in Beijing, Shanghai, Guangzhou, Hangzhou and Kunming, all kinds of people, men and women, young and old, patrolled to stop foreigners to ask for money changing business. Meanwhile, around outlets of Bank of China, black dealers stopped whoever they believed to be a potential customer to ask: "Need FECs?"

Even the central bank's move to unify the dual-rate system and stop issuance of FECs in the beginning of 1994 didn't perish this profession. The black money-changers only changed their question to "Need US dollars?" as individual Chinese people still didn't have official channels to buy hard currencies but the hunger for US dollars kept growing.

Things started to change in 1998 when China began to gradually relax rules on individuals buying foreign currencies. In that year, regulations were released to allow individuals to buy $2,000 on each overseas trip for private purposes.

In September, 2003, the quota was raised to $3,000 for overseas trips within six months and $5,000 for trips longer than half a year, and a further rise in August 2005 sent the quotas to $5,000 and $8,000 respectively.

Starting May 1, 2006, an annual quota system was initiated under which one Chinese person could buy $20,000 per year. The quota was raised to $50,000 starting February 1, 2007.

With Chinese people enjoying the freedom to stop by major bank outlets today to buy hard currencies, the once happy money-changers had to look for new businesses to make a living.

Collections' item

The Friendship and duty-free stores also faced a transition. Most became ordinary department stores, although some still retained the name of "Friendship Store".

The Foreign Exchange Commodities Building in Beijing's Chaoyang District was once one of the biggest shops in Beijing for FEC holders. In the early 1990s, shopping there with FECs was something, which aroused envy. Later it was refurnished and became the Beijing international jewelry trading center.

But the FECs became new favorites for some people again - this time, in collection market.

In Beijing's stamp and coin collection market, a whole set of FECs of seven face values can be sold at around 10,000 yuan now.

In Xiamen, the 5 jiao FEC with Temple of Heaven picture on its back is traded at around nine yuan while the price for FEC with a face value of 100 yuan with picture of the Great Wall was about 1000 yuan.

Traders believe there is room for further price hike because most of the FECs were destroyed after being recouped by the Bank of China, with a very limited number still in people's hands.

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