BEIJING, Nov. 24 (Xinhua) -- Generations of Chinese children have been taught to practice thrift by putting their pocket change into piggy banks. However, many continue the habit as adults, which -- combined with rising prices in China's richer regions -- has caused severe shortages of coins and small-denomination notes.
In hundreds of millions of these home banks, Chinese are hoarding a big percentage of the nation's small change. As a result, stores, peddlers, restaurants and even banks are short of coins, according to a southern Chinese weekly newspaper report.
The shortages are particularly severe in the more prosperous cities of southern China, where prices have been rising fast, the newspaper reported.
The shortages have given rise to an underground trade of "professional exchangers" who supply coins and low-denomination notes, at a commission of about 2 percent.
But with the shortages worsening, especially in the booming southern province of Guangzhou, the unofficial price of 100 one-yuan coins can be as high as 125 yuan, according to the report in the Workers' Daily.
"For the convenience of customers, we have to buy small change from the dealers, even though commissions are increasingly high," said a peddler.
There are similar shortages in the coastal province of Shandong. There, according to official statistics, the central bank has issued coins worth 40 million yuan (5.26 million U.S. dollars)since 2006. Most of these have vanished from circulation.
Meanwhile, a veritable mountain of small change from bus passengers is collected every day by public transport companies, which then send most of it to the bank, the newspaper said.
But supplying coins has become a side business for bus lines, which supply amounts ranging from 3,000 to 5,000 yuan (395 to 658 U.S. dollars) to small businesses ranging from lottery vendors to restaurant operators. The bus companies charge "reasonable fees" to cover the cost of "manual currency counting", the newspaper said.
WHERE ON EARTH ARE ALL THE COINS?
People find it increasingly inconvenient to discover that their100-yuan notes are useless when it comes to buying vegetables, taking buses or using public phones -- small transactions that require small change.
A bank clerk in Guangzhou told the newspaper that the small-change shortage is an annual phenomenon that worsens at year-end. That is because the People's Bank of China (PBOC), the central bank, usually issues coins to commercial banks at the start of each year. By the end of the year, most have disappeared into the piggy banks of the nation.
A PBOC source told the newspaper that "the structure of the country's currency issuance is reasonable and the issue amount is adequate, but 60 to 70 percent of small-denomination money is being held by the public."
The source said saving boxes had become a must-have in every Chinese household. Soaring prices have also worsened the small change shortage, because people seldom use currencies under one-yuan.
The issue of one-yuan coins and notes cannot solve the problem without the help of the 0.5-yuan, 0.1-yuan or even smaller denominations.
WHAT PREVENTS RECYCLING OF COINS
When a man surnamed Zhang in northeast Shenyang carried two large bags containing some 37,000 coins worth more than 600 yuan (79 U.S. dollars) to a local bank, he was told that the "currency counting fees" would amount to 600 yuan.
Zhang returned home with the coins that he had collected over the past decade.
Since 2005, banks in large cities such as Beijing, Shanghai and Shenzhen have charged "currency counting fees" under a 2003 regulation promulgated by the China Banking Regulatory Commission.
The public has questioned the validity of the practice and complained that it violated the principle of equivalent exchange of currencies.
Businesses have in some cases declined to pay such fees, with some unusual results. Employees of a bus company of Shenyang once got their monthly pay entirely in coins.
Meanwhile, in the warehouse of a Qingdao bus company in Shandong, many small-denomination notes were stored for so long, they began to rot. In the rainy season that affects southern China, where the shortages are most acute, banknotes disintegrate even faster than in other areas.
A bank clerk in Shanghai defended "currency counting fees" by saying that his bank had to assign more than 40 staff each day to count coins worth more than 2.6 million yuan (342,000 U.S. dollars).
IS THERE AN ELECTRONIC SOLUTION?
The chronic shortages are getting expensive in more ways than one: the actual cost of producing currency has been increasing along with demand for small-denomination notes.
Meanwhile, there are many opinions about how to solve the shortages.
Economist Mao Yushi told the newspaper that banks must always store enough small-denomination notes.
Bankers, for their part, said they believed that buses and supermarkets should promote electronic transactions.
Legal experts said the "exchange" trade and "currency counting fees" charged by banks should be banned to safeguard the principle of equivalent exchange.
And yet other people said that supermarkets should avoid prices such as 9.9 yuan to make it easier for customers to pay without small-denomination currency.
But both eight and nine are considered auspicious numbers in China, and prices like 99 yuan are commercial strategies used to make prices seen cheaper than 100 yuan.
