The Rising Influence of Rising Affluence

[oc631]

What are the risks of opening a yuan account? The principal one is probably the missed opportunity of doing something else with the money. There is still no guarantee the yuan will rise by much any time soon, so you could be sitting on dead money for a long time. And in theory China could always suspend convertibility back into dollars, though the chances of that must be minimal.

One more risk that comes to mind. How will the Bank of China calculate the currency bid/ask price upon conversion and how much will they profit (or you lose) from it? Aside from that I think it's an excellent opportunity and could be looked at as a second tier retirement fund and a hedge against dollar exposure.

Another positive not mentioned. If you hold a yuan based account, and the yuan appreciates 10% against the dollar, I assume you just made a 10% tax free return (less the spread charged by the bank). If you had your money in a U.S. dollar savings account you would still be paying taxes on that meager .50% interest. I agree with the article's assumption that the yuan is heading only up.