Chapter 106: Foreign Exchange Certificates

Foreign exchange certificates were no mere illusory protective measures; they represented real, tangible money. Younger generations might be unaware of such currencies, but these certificates were issued domestically by the Bank of China starting in April 1980 and circulated until 1995, officially withdrawn in 1996. Over fifteen years, they helped the nation amass substantial foreign exchange reserves.

So, what exactly were foreign exchange certificates? Their full title was Foreign Exchange Settlement Certificates. Officially, they were special RMB vouchers circulating within the People’s Republic of China that could be exchanged for foreign currency.

Naturally, alongside the official explanation, there was a popular one: these certificates were more useful than regular RMB because they could buy goods unavailable to those using standard currency.

In essence, when foreigners entered China, they couldn’t directly exchange foreign currency for RMB. Instead, they had to convert their foreign money into foreign exchange certificates at banks, then spend these certificates at designated venues—luxurious hotels, special shopping centers, tourist spots—places generally inaccessible to ordinary citizens.

At that time, foreigners were prohibited from freely spending RMB within China; it was neither permitted by the authorities nor accepted by locals. Why such convoluted restrictions? Though Hong Tao wasn’t a finance expert, he knew that possessing these certificates allowed one to purchase many imported goods. Moreover, a unique industry emerged around this currency—locals in Beijing referred to these practitioners as “certificate dealers” and “certificate cutters.”

While “certificate dealing” and “certificate cutting” were distinct concepts, they often intertwined. Dealers specialized in trading foreign exchange certificates. Initially, they gathered around Ritan Road, the Friendship Store, and embassy areas. Like modern scalpers, whenever they encountered foreigners or Chinese entering these upscale venues, they’d approach and ask, “Got any foreign exchange certificates?”

If you said yes, they’d offer to exchange RMB for your certificates—though never at a one-to-one rate, always slightly higher. Some foreigners residing long-term in Beijing would sell their certificates to these dealers, then use the RMB to shop in ordinary markets. The dealers, in turn, sold certificates to those who needed them more, profiting from the margin.

Who needed them more? The regular folks, of course. For example, if you were about to get married but your family lacked a color TV or washing machine, and you couldn’t buy those with RMB alone, you’d reluctantly exchange RMB for foreign exchange certificates. Then, you’d shop at the Friendship Store or the Overseas Chinese Service Department. Of course, this was after 1982, when Beijing households had upgraded their “three major appliances” from sewing machines, watches, and bicycles to color TVs, refrigerators, and washing machines.

As times progressed, these dealers expanded beyond just certificates—they traded US dollars, Japanese yen, British pounds, Hong Kong dollars, and more. They were among the first in China’s reform era to engage with international finance. By the late 1980s, some dealers handled enormous sums, able to gather tens of thousands of US dollars within hours. Anyone traveling abroad who wished to buy goods overseas had to seek them out, since the state limited foreign currency exchange for travelers.

Among these dealers were honest resellers and some unscrupulous types—the “cutters.” The term “cut” implied trickery, vividly illustrating how your 100 yuan could be “cut” down to 80 yuan before you even noticed. These cutters employed sleight-of-hand techniques—secretly removing bills during exchanges, or giving you the right amount initially, only for you to discover discrepancies later at home.

Over time, their tactics grew bolder. No longer content with pilfering a few bills, they sometimes swapped entire bundles, causing significant losses to many unsuspecting victims.

Hong Tao had no intention of trading or cutting certificates himself. What interested him was using foreign exchange certificates to shop at the Friendship Store for imported goods—items yet unseen in domestic markets like washing machines, refrigerators, color TVs, as well as Marlboro cigarettes, imported cosmetics, perfumes, clothing, shoes, and other daily necessities. He didn’t plan to resell these goods; he simply wanted to improve life for his family and business. Why not?

Ms. Jiang did not deceive Hong Tao. Just two days later, she brought him 1,000 yuan worth of foreign exchange certificates—exchanged at an even one-to-one rate. This generosity embarrassed Hong Tao—not because of the exchange rate, but because her kindness made him reluctant to ask for more. Yet Hong Tao wasn’t merely interested in buying a couple of washing machines; he had many other items in mind. He resolved to rope Ms. Jiang in.

“Sister Jiang, why don’t you accompany me to the Friendship Store sometime?” Hong Tao began to lay his trap.

“You can have your parents go with you,” she replied.

“Heh, my folks are simple, honest commoners. They’d just wander around the department store and avoid foreigners. Besides, none of us has a foreign passport, work permit, or overseas Chinese certificate. We wouldn’t even get in!” Hong Tao had his response rehearsed.

“You say your family is honest commoners, but how did they produce such an oddball like you?” Ms. Jiang teased, pinching his cheek.

“Probably because I’m the first child. My parents had no experience. See, both have big eyes, but they gave birth to me with small eyes. I guess if they had another baby, it’d be more normal,” Hong Tao answered with a straight face.

“Hahaha! If I were your teacher, you’d drive me crazy! You argue about everything. Come on, let’s go now—I have some free time this afternoon.” Surprised and amused by his reply, Ms. Jiang laughed heartily before succumbing to Hong Tao’s persistence, dragging him off toward the station.

The Friendship Store stood on Jianguomen Outer Street. Across the street to the west was the International Club—the primary entertainment venue for foreigners in Beijing. It boasted a swimming pool, ballroom, and regularly hosted banquets and cocktail parties. It was arguably the most upscale social club in the capital. To the east lay apartments for diplomatic personnel, housing foreign embassy and liaison office staff. Later, the nearby Xiushui Street shopping area emerged largely due to this concentration of foreigners.

The Friendship Store’s predecessor was located on Donghuamen Street, initially called the International Friends Service Department, supplying butter, cream, bread, and other essentials primarily to foreign embassy staff, not open to the public. Later, it merged with the Overseas Chinese Service Department in the department store and the Overseas Chinese Store, relocating and renaming itself the Friendship Store. The store’s founding slogan declared: "For goods available on the market, we must offer the best; for goods unavailable, we must stock them; and for foreign trends, we must have them too!"

This was no boast. The new Friendship Store spanned four floors, offering over ten thousand products—each a sought-after commodity. The store was enclosed by iron railings, locked after hours, and customers queued outside before opening. Waiting outside the Friendship Store was akin to lining up at the most exclusive private club in later Beijing.

“Please show your identification,” a guard requested at the entrance.

“I’m a translator at the Ministry of Commerce, serving at the Ministry of Foreign Affairs. Here’s my badge,” Ms. Jiang produced a red work ID from her purse.

“And this child?” the guard returned the badge and gestured at Hong Tao.

“He’s my younger brother,” Hong Tao lied without batting an eye.

“Ah, yes, he’s my brother,” Ms. Jiang nodded, having no choice but to continue the charade.

The guard said nothing further and admitted them.

The first-floor hall was filled with food items—chocolates and international liquors lined the shelves. Hong Tao glanced briefly before leading Ms. Jiang to the fourth floor’s premium goods section. This vast space was dominated by televisions, washing machines, refrigerators, air conditioners, fans, bicycles, and motorcycles. Hong Tao longed to buy everything, but with only 1,000 yuan in foreign exchange certificates, he could afford just two Sanyo washing machines, each costing over 400 yuan but featuring twin tubs and spin-dry functions. A single 14-inch Jin Xing color TV alone cost more than 1,500 yuan.

“Wait here while I buy some chocolate,” Hong Tao said, as staff helped carry the washing machines to the doorway and strapped them onto a delivery tricycle. He then dashed back inside.

“Slow down! Don’t run!” Ms. Jiang called out, but made no move to stop him. With so many imported treats, even she occasionally indulged her cravings.

In truth, Hong Tao wasn’t after snacks. He headed to the second-floor cosmetics counter and spent the remainder of his money on a bottle of French perfume—over 100 yuan for a small bottle. But he didn’t begrudge the cost. To catch the wolf, one must be willing to let the child go. He intended to involve not only Ms. Jiang but her colleagues too, ensuring his future supply of foreign exchange certificates would come from them.

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