The Big Mac Index

Actually I think I’m the last guy you should be turning to for financial advice, my wallet is always near empty. And here I am, writing on finances in Xiamen. Well, since nothing in Xiamen seems what it looks like, it’s actually a perfect fit.

So I went to Mac Donalds. I must admit, I don’t think it’s the most delightful place to take my dinner, but I only went there, for a good cause. I want to inform students who would like to do their internship at www.CheckitCenter.com on some financial issues… and making a difference.

So, if you want to do a proper analysis of the currency of a foreign country, the first thing you can do is go to Mac Donalds and buy a Big Mac. I chose a menu – by pointing my finger at some pictures they show foreigners.

THE Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries.
Source: www.economist.com

The price of a Big Mac Menu in the Netherlands in November 2013 is € 5.95, that’s ¥ 49.26 (yuan). The price for a Big Mac Menu in Xiamen however costs only ¥ 21.00 So this “raw” Big Mac Index says that the yuan is undervalued to the euro by 42.5% today. 1 Chinese Yuan equals 0.12 Euro.

Now for something more tasteful.

When I come back from work I walk to a dozen of mobile pop-up restaurants just next to my apartment. There’s one lady who always notices me with a smile from a far. She makes the best pancakes in town, for only ¥ 3.5, that’s 0.50 euro. After a kind of post-siesta at my apartment (these students really knock you down during ‘a day at the office’ ☺) I leave my ‘skyscraper’, walk across the street, into the slums and have my dinner at a cozy place with very gentle people where I practice my first Chinese words 鸡蛋- Jīdàn(egg) 西红柿 – Xīhóngshì (tomato) 饭- Fàn (rice). This meal only costs ¥ 3.5 and that’s a beer included. And every evening during the week I eat there, I think of the Big Mac Index and I know it’s the right choice I make to come here (and not go to Mac Donalds) and make a very, very, very small difference for these people, pancake by pancake, meal by meal.

Oh, and about ‘nothing seems what it looks like’;
As a cloggy (that’s how the English call us ‘A particular breed of human who inhabit an exceedingly flat country bordering on the North Sea’) you come here full of assumptions on how life should be lived. Then you walk the streets of Xiamen and traffic alone hits your assumptions so hard, you just have to break your unconscious habits or these habits will brake you ☺

So why choose for www.checkitcenter.com?
Just for raising your awareness levels, will do fine.

p.s. If you want to know more about the cost of living in Xiamen, have a look at www.Numbeo.com

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