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appreciating against the US dollar, from Rmb 2. 29/US$1.00 at the end of 1971 to Rmb 1.51/US$1.00 at the end of 1979. Its appreciation against the Hong Kong dollar was sharper and more long-lasting, from Rmb 40.2/HK$100 at the end of 1971 to Rmb 25.3/HK$100 at the end of 1983. But in
more recent years, the official exchange rates of the Renminbi against both the US dollar and the Hong Kong
dollar have worsened. By the end of June 1987, they were at the low levels of Rmb 3.72/US$1.00 and Rmb 47.7/HK$100
respectively.
14.
Besides the official rate in the early 1980s
there was an Internal Settlement Rate (ISR) fixed at
Rmb 2.8/US$1.00, about one yuan higher than the official exchange rate at that time, which was applicable to foreign trade corporations and other enterprises engaged in external transactions. This was intended to encourage enterprises in China to earn more foreign exchange and to discourage them from spending more foreign exchange than was really necessary. This ISR was, however, abolished by around end 1984 or early 1985 when the official exchange
rate of the Renminbi was depreciated to below Rmb 2.8/US$1.00. More recently, in order to encourage exports, the BOC again offered a more favourable exchange rate of around Rmb 4.7/US$1.00, as compared to the official rate of Rmb 3.72/US$1.00, for the purchase of surplus foreign exchange earned by some enterprises in
some cities in China.
15.
Apart from the official rate and the
internal settlement rate, the exchange rate of the Renminbi in the black market has been gaining influence as the underground economy and black market activities experienced rapid growth in the past eight years, following the adoption of more liberal domestic and
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