Liu Minxia

AS the yuan is set to break the key barrier of seven to the U.S. dollar any day now, converting U.S. or Hong Kong dollars into yuan will prevent further losses, experts have suggested.

“It’s better for individuals and companies holding U.S. or Hong Kong dollars to convert their assets into yuan as soon as possible,” said Guo Shiping, head of the finance research center at Shenzhen University. “The yuan is appreciating at a fast speed and you can benefit from it after you convert.”

However, some yuan asset holders complain they don’t feel their purchasing power growing as the yuan becomes stronger. Guo said that purchasing power would not grow until the yuan became fully convertible. Predictions that the yuan will keep rising have been attracting massive inflows of cash, adding US$60 billion in foreign reserves in January and in February, and helping push up the consumer price index, Guo said.

The yuan is only gaining value against the U.S. dollar and Hong Kong dollar because the greenback continues to be weak. However the Chinese currency has begun to depreciate against the euro and other major currencies, according to Guo. “Yuan rise doesn’t affect the export companies targeting the markets in the euro zone,” he said.

Xu Shiyan, a wealth management manager with Citibank’s Shenzhen branch also suggested converting dollars into yuan. “But for individuals, there is a limit of US$50,000 or same amount of other foreign currencies a year for exchanging into yuan.” Xu has suggested foreign currency holders consider euro-denominated funds and diversify their investments to hedge against inflation and exchange losses.