PMG Blunders on Chinese Yuan Grading

Grading firms make mistakes. It is inevitable considering the profundity of currency diversity, each calling for yearslong of serious studies and constant revision as markets discover new facts. As collectors who pay a premium for the grading firms' services, we reasonably expect a certain level of competency in their ability to authenticate, classify and grade. The odd mistakes are fine, but where do collectors draw the line how frequent is too much to bear? And should we impose these grading firms the onus to self-declare their error rate? After all, these firms, if they are in for the long run, should have a database of their graded notes, and can identify those wrongly attributed as new information flows into the market. This seems like a tall order now, but it is something that collectors need to ponder over for the long run. Numismatic collection is a long-term hobby and serious numismatists must consider which grading firms are willing to make strategic investments to improve their own accountability before relying on their services.

PMG is a leader amongst grading firms. Its recent and rapid expansion into the Chinese market is worrying on a few fronts. A slight one, for example, is its willingness to push out labels of Chinese pedigrees, but only for notes sent through one specific Chinese agent. In creating this monopoly, it confuses the market as notes of the same attributes are sometimes encapsulated in Chinese-pedigreed labels, and sometimes not. This confusion risks skewing the prices of same-attribute notes as the pedigree may be mistaken, or misused by dealers, for better credibility.

Another more disturbing example is PMG's willingness to yield, presumably, to dealers' pressure to start recognizing slight variants, thereby creating trivial differentiation amongst largely similar notes. The 4th series CNY is a prime example, where the slightest difference in fluorescent profile is deemed important enough for PMG to make up as new Pick number. Worse, some of these granular Pick number does not even appear on PMG's official population report. It is hard to see why PMG is doing this except to create demand through granularity by preying on collectors' proclivity to amass a "full" collection. PMG needs to make clear in a statement policy what constitute sufficient conditions for a new catalogue number. 

The cardinal sin, in my opinion, is PMG's misses on authenticity and cataloguing. Mistakes on these fronts suggest a lot of domain expertise, and therefore a lack of credibility. A common mistake that PMG made with cataloguing CNY banknote relates to replacement note. The nature and relative scarcity of replacement notes make them, in general, more valuable than the standard notes, and collectors need to know that PMG can properly identify and catalogue these notes. Unlike the US convention where replacement notes are marked with a star symbol (thus star note), the CNY replacement notes do not have special symbols for easy identification. Rather, they are identified through careful research and the Chinese market then comes to a consensus on the prefixes that constitute replacement notes. It is in these treacherous and ambiguous areas where PMG need to step up. After all, if the identification of a replacement note is as easy as spotting the star, there's really no need for the grading expertise of a firm whose service does not come cheap. And misclassification can cause confusion, a malaise that grading firm is in the business to fix, not exacerbate. PMG's performance on this front can be pretty wanting for the 3rd series CNY banknotes.

Finally, on authentication, here can be no greater sin than grading a counterfeit currency as authentic, and PMG gets it wrong with non-trivial frequency with the 1st series CNY banknote.

Of course, PMG has a guarantee policy to mitigate authenticity issue, but that's not the point. The point is it's willingness to invest to get better, not worse, over time and a simple way to start is for it, and other grading firms, to self declare their own error rates. If a grading firm does not have the necessary database to do that, then that's a genuine concern for it signals that the firm does not know the full details of all the note it graded, which is unacceptable.

Below are some actual evidence of PMG's blunders on CNY banknotes.

Exhibit 1: We'll start with same-attribute note (P886f) but one in a Chinese-pedigreed label and one in a normal label. Now, if it is a matter of collector's choice, that's fine but that's not the case. As a normal collector, your P886f will not be encapsulated with the Chinese-pedigreed label because that is reserved for notes submitted by a single Chinese dealer only. 

Exhibit 2a: Next up, the proliferation of fluorescent variants. Some may say this is fine, and is integral to better understand of numismatic history. All fine, except that PMG is perhaps non committal in its pliable cataloguing practice too. P881bf1 cannot be found in PMG's official population report as of  12 Dec 2018 too. Why, PMG?

Exhibit 2b: The reverse with the necessary information for verification.

Exhibit 3a: Here, we have a Pick877f, essentially a 3rd series 1 Jiao CNY banknote that PMG attributed as a replacement note. This attribution is inaccurate: the consensus is only notes of prefix 99, and maybe 98 (but this is contentious), are replacements. As grading firm, PMG needs to demonstrate sufficient expertise and market awareness. The extra irony is that this is the single top graded P877f replacement note in PMG population, and PMG got it wrong.

 Exhibit 3b: The reverse for verification.

Exhibit 4a: Here we have the reverse problem: this P877d has a consensus replacement prefix of 94 but is not properly attributed as such.

Exhibit 4b: The reverse for verification.

Exhibit 5a: The biggest sin is this. We have a P831b  that is a 1st series CNY banknote with 8 digit serial number. There is a scarce P831a with 6 digit serial number. Now notice the prefix 312, and this belongs to the first prefix block 123 (read about 3rd series prefix blocks here). As serious collector of the 1st series CNY banknote knows that for this note, the first 100 or so prefixes belonged to the 6 digit serial number variant. And since 312 is the fifth prefix, it cannot be a 8 digital serial number type! At PMG 67, this is the top grade for P831, except that PMG probably bestowed it to a counterfeit note.

Exhibit 5b: The reverse for verification. Note the old hologram indicating that this note was probably graded before 2011 (read here on PMG's holder evolution). It is best to avoid these early PMG graded 1st series CNY banknotes because PMG is known to be rather weak on this front in its early days.

 Exhibit 5c: The note was sold on eBay, by a Florida seller with 100% feedback rating, for $1,025 in early January 2019.

Exhibit 5d: The buyer probably realized that the note is counterfeit, and put it for sale on a Chinese auction site. Although the site doesn't note the prefix issue, bidders seem to know and interest has been lackluster. Further update: this note was withdrawn from the auction.

 Exhibit 6a: Interestingly, the same eBay seller has, in late January 2019, put up a complete set of CNY 3rd series 1 Jiao notes, less the curious P877e, for sale. To be honest, only P877a and P877b are valuable, and the rest are fillers. However, neither of these notes, despite being PMG-certified, is correct. The validation is simple: just look at the prefixes (check out the P877a and P877b links for learn-hows), and you'll find that they are both wrong for their respective classifications. In fact, both notes are the much less valuable P877g that have been misclassified by PMG.

Exhibit 6b: The set of notes sold for US$6,400. I'll not venture to speculate if there was any manipulation at this auction, but will say that the buyer, if genuine, had overpaid for this lot. There is no single note in it that's worth more than US$50. The purported valuable notes, P887a and P877b, are really mis-categorized P887g