''ONE hundred and eighteen,'' shouted a man blatantly flipping a two-inch-thick pile of yuan notes in front of the Mongkok branch of Hongkong's only official yuan trader, Po Sang Bank. He attracted instant attention from a crowd of people gathering beside a sign board showing the bank's exchange rates. It sells 117.65 yuan for HK$100 and buys 125 yuan for $100. Next to the tall man was a plump woman who approached a Business Post reporter and asked discreetly: ''Want renminbi? I sell 118 yuan for every $100 - better than the bank's rate. Interested?'' A shorter man was busy dealing out his business cards to the crowd and putting a pile of them on top of an advertisement board standing little more than a metre away from the bank's entrance. The board read: ''Money Changer. Selling 118 yuan. Buying 123.5 yuan. Just across the road.'' An arrow helped to direct interested buyers and sellers. The short man was coaxing the crowd to deal at the money changer. The woman made several deals in public during the hour that Business Post was watching. Not only yuan sellers, but yuan buyers, were active in the black market. A young man was offering to sell HK dollars for yuan. ''I offer a rate between the bank's buying and selling rate. So both I and my opponent [client] in the transaction can benefit,'' he said, coolly leaving the area after getting the number of yuan he wanted. The buzz of activity did not die down, even when police patrolled past in pairs. They did not intervene, neither did bank staff. Both the young man and the tall man denied that black market trading was their profession. ''My work needs me to go to China from time to time,'' said the young man, who lived in the territory. ''Every time before I go, I hang around here and approach people who seem to need HK dollars in exchange for yuan.'' The tall man, who claimed to be a mainlander, said: ''I come here to sell the money I've earned from my business for HK dollars.'' He came to visit relatives about once or twice a month, he said. ''Every time I come, I do my exchange here [in front of the bank branch entrance],'' he added. The tall man and the woman offered the same rate, and the two chatted from time to time. However, he claimed they were not accomplices: ''I didn't know her until coming here today.'' She darted away as soon as Business Post disclosed its identity. It is impossible to trace whether those selling yuan are mainlanders who regularly bring a huge sum from China to sell in Hongkong and then take dollars back to sell to China locals at a profit. There is no official channel for ordinary people to buy foreign currency in China. The territory's black market of loitering individuals was formed after March 1, when all travellers to and from China were allowed to carry 6,000 yuan (about HK$8,100 at official rates). The Beijing government designated Po Sang Bank to provide exchange services in the territory. However, with its official status, it became a good place for black marketeers who knew they would find yuan buyers there - among them, the more calculating mainlanders and Hongkongers who wanted better rates than the bank would offer. The black market adds to the Chinese currency's elastic exchange rate. There were already a motley variety of rates in China - the official rate, regulatory rate and different black market rates in different cities. ''It is not good to have so many rates as this creates so many uncertainties,'' said Peregrine Brokerage senior economist Vincent Chan Cheong-wa. The Hongkong black market seems to be pushing China a step back from its ambition to achieve a single exchange rate. However, Mr Chan said the effects were minor unless there was a huge volume of activity. Neither would the black market rates in the territory drag down the official rate, which was largely determined by the regulatory rate dictated by supply and demand at the swap centre for China traders. Mr Tse Kwok-leung, associate economist at the Bank of China's Hongkong-Macau Regional Office, said that having players on the black market competing with Po Sang Bank would benefit consumers, who could choose the best rates. The black market is legal in Hongkong. An estimated 50 money changers handle yuan in the territory, mostly in Mongkok and Sheung Wan. As Hongkong does not impose foreign exchange controls, black market traders are not breaking the law provided the currency they buy is for their own use and not re-sold, according to a lawyer. If they were found trading it in the same way as money changers, they could be charged with a tax offence, he said. One money changer said he got the mainland currency partly from enterprises in China, which wanted HK dollars. Money changers do not need a licence, other than an ordinary commercial licence, to operate. They must observe the Money Changers Ordinance, which states, among other regulations, that a money changer should maintain a board clearly displaying the buying and selling rates, and that it should be put in a well-lit place where the customer has an unobstructed view of it. For every transaction, a transaction note of a specified format should be completed in duplicate. One copy should be kept by the customer, the other by the money changer in case of police inspection. ''The law already offers adequate protection to customers of money changers,'' said Monetary Authority chief executive Joseph Yam Chi-kong. However, trading with individuals presents great risks. Devious mainlanders in particular are notorious for cheating yuan buyers in China - giving either fake notes or a smaller amount of money than promised. ''It is not advisable for people to buy currency from individuals on the street. Should any problem arise, how can you hold the dealers liable?'' said Consumer Council deputy chief executive Li Kai-ming. Most people seemed happier to join the long queue at Po Sang Bank and accept their less attractive rates. ''I feel more secure exchanging at the bank. Money changers may not be trustworthy - far less the individual traders,'' said a man leaving the bank.