While writing the previous post on the things that I had seen at my grandmothers house, I had forgotten to show one more, and perhaps the coolest of the bunch. Prior to my trip to China last January, my grandmother had given me a few bills that she had left over from her trip. “Take these”, she said. Funny enough, none of them were of any use. Several of the bills are from Hong Kong, and one of the, a small slip of paper, is actually a foreign exchange certificate, dated 1979. It is valued at .10 Fen, making it worth next to nothing, and I don’t think there is any place in China were it could be used at this point. Measuring a little bit more than an inch wide and about 4 inches long, it is a peculiar size.
The most interesting part about this bill is the history behind it (not this particular one, but this type). In reality, it is not actually a bill, it is a certificate; a Foreign Exchange Certificate. As I had pointed out, it was printed in 1979, just one year after Deng had taken power and China was beginning its process of opening to the world, the famous time known as ‘Opening and Reform’. Deng was extremely conscious of the need for China to build its economy in order to achieve success. At the time, the nation was working to pull itself from the rock bottom that had bit hit during the cultural revolution (The revolution ended just three years prior, at the death of Mao in 1976). Deng wanted to draw in foreign investment in some of China’s coastal cities, taking the foreign money in exchange for China’s large and eager work force. At the same time, it was important that the money that was invested within China stay with China. Deng didn’t want foreign visitors taking Renminbi out of the country. In order to prevent this, the government made it illegal for foreigners to possess the natural currency, instead issuing them these ‘Foreign Exchange Certificates”.
Instead of doing a direct money exchange, foreigners would be forced to purchase these certificates at a rate slightly higher than a direct exchange. This was part of the process of generating some capital from the transaction. To go one step further, the certificates limited the purchasing power of the buyer. Foreigners were confined to shopping within the Chinese Friendship stores, areas of commerce that were limited to foreigners, and at which they would only accept the Foreign Exchange certificate.
Following the death of Mao, many people in China’s government feared the economic reform that Deng Xiaoping sought. His ideas went contrary to the programs put forth by the communist party for three decades prior. Deng was aware of this, and proposed that they could safely experiment with open-market style reform by limiting commerce to very specific cities (the special economic zones), as well as by heavily controlling what goods and funds were available to foreigners, by means such as the Foreign Exchange Certificate. It was almost like a sub-economy within the larger one. The plan worked with incredible success, and eventually the limitations of the exchange certificates became apparent. They were taken out of service sometime in the 90s, I believe. Pretty cool little piece of history.