No! Really! We REALLY don't want Hong Kong dollars!

The big news is that the RMB has hit parity with the Hong Kong dollar. The Hong Kong dollar has been fixed since the 1980's at 7.8 to US$1. Yesterday, the Chinese Yuan hit 7.8 to US$1.

The results were to be expected in Shenzhen. Sure enough, I was in a taxi. I gave the taxi drive a choice -- break a big ole RMB 100 note or accept a HK$20 note. He could not decide but really did not want the HK$. I tipped him RMB 0.50 and then he accepted the HK$ reluctantly.

No thank you to Hong Kong dollars!

Having spent the last three years or so in the Shenzhen Special Economic Zone (across the border from Hong Kong), I became accustomed to using Hong Kong dollars (HK$) occasionally for anything from taxi fares to meals. In the near past, the HK$ seemed to have a bit of a cachet in Shenzhen.

However, in the last four months or so, with the rapid appreciation of the Chinese yuan (or renmibi, RMB), the HK$ has fallen out of favor -- and fallen hard. The RMB was pegged at about 8.2 / US$1 , but now is on par with the HK$ at about 7.8 / US$1. I think consumers realize instinctively that the RMB will appreciate further as well.

As a result, Chinese in Shenzhen now eschew the HK$. You almost can't give the stuff away! Case in point, a recent taxi fare came to RMB 20.6. I gave the driver a RMB 20 note and a HK$2 coin. All I had. The driver refused the coin although that would have been a rather robust tip by Mainland Chinese standards (tipping of any sort is not done in China). He said "I can't give this away."