| The renminbi (Traditional Chinese: 人民幣, Simplified Chinese: 人民币, literally
means "people's currency") is the legal tender in the mainland of the People's Republic of China. It is issued by the People's Bank of China, the monetary authority of mainland China. The official ISO 4217 abbreviation is CNY.
Renminbi units
The base unit of the renminbi is the yuan. As with Chinese numerals, this character has two forms — an informal form
(元) and a formal form (圆) used to prevent alterations and accounting mistakes. One yuan is divided into 10
jiao (角). One jiao is divided into 10 fen (分). The largest denomination of the renminbi is the
100 yuan note. The smallest is the 1 fen coin or note.
The word yuan is the usual translation for the word dollar, and the abbreviation RMB¥ is sometimes written as
CN$.
Yuan in Chinese literally means a "round object" or "round coin".
Although shop prices in the PRC are usually marked with 元 after the digits, a Y with one crossbar (before the digits)
is also common. The Y with one crossbar is represented by the same Unicode code point
as the Japanese yen although the Japanese symbol tends to have two crossbars.
Denominations
The Renminbi is split not into two, but three, base units: yuan, jiao and fen, respectively 1/1, 1/10 and
1/100.
One of the more interesting things to note is that all denominations -- from the smallest, 1 fen, to the
largest, 100 yuan -- are available as banknotes. The fen notes are now rather insignificant, and the design has not
changed since 1953.
Banknotes
- CNY 100
- CNY 50
- CNY 20 (introduced with the 5th series beginning in 1999)
- CNY 10
- CNY 5
- CNY 2 (currently disappearing in usage, although it has apparently not been recalled)
- CNY 1
- CNY 0.5
- CNY 0.2
- CNY 0.1
- CNY 0.05 (very rare)
- CNY 0.02 (rare)
- CNY 0.01
Coins
- CNY 1
- CNY 0.5
- CNY 0.1
- CNY 0.05
- CNY 0.02
- CNY 0.01
5th Series
In 1999, a new series of Renminbi banknotes and coins were progressively introduced. Affected were the
following banknotes:
- CNY 100
- CNY 50
- CNY 20 (new with this series)
- CNY 10
- CNY 5
- CNY 1
The following coins were also affected:
The new banknotes are designed to combat counterfeiting. The image of Mao
Zedong now appears uniformly on all 5th series banknotes. (This is so that people can now recognise banknotes even more
easily; if a new banknote doesn't have Mao's image on it, it's almost certain to be a fake.) The newest banknote introduced was
the CNY 1 note, introduced on July 30, 2004.
The 4th series, introduced in 1980 and 1990 (with
the CNY 1 note getting another minor change in 1996), are still valid. In 2000, the People's Bank of
China recalled the 3rd series, which were dated from the 1960s and the 1970s.
History
The renminbi was first issued shortly before the takeover of the mainland by the Communists in 1949. One of the first tasks of
the new communist government was to end the hyperinflation that had
plagued China near the end of the Kuomintang era.
During the era of the command economy, the value of the RMB was
set to unrealistic values in exchange with western currency and severe currency exchange rules were put in place. With the
opening of the Chinese economy in 1978, a dual track currency system was instituted, with renminbi usable only domestically, and
with foreigners forced to use foreign exchange certificates. The unrealistic levels at which exchange rates were pegged led to a strong black
market in currency transactions.
In the late 1980s and early 1990s, the PRC worked to make the RMB more convertible. Through the use of swap centers, the exchange rate was
brought to realistic levels and the dual track currency system was abolished.
The RMB is convertible on current accounts, but not capital accounts. The ultimate goal has been to make the RMB fully convertible. However, partly in
response to the Asian Financial Crisis of
1998, the PRC has been concerned that the Chinese financial system would not be able to handle the potential rapid cross
border movements of hot money, and as a result, as of 2003, full convertibility
remains a distant goal.
Exchange rate of the dollar vs. the renminbi
Since 1994, the policy on currency has been to informally peg the value of the renminbi against the value of the United States dollar. This policy was praised during the Asian Financial Crisis of 1998 as it prevented
a round of competitive devaluations.
In 2003, this policy came under criticism by the United States. The fall in the value of the dollar caused the value of the
renminbi to also fall making Chinese exports more competitive. This led to some pressure on the PRC from the United States to increase the value the RMB in order to encourage imports and
decrease exports. This is a policy that some feel would preserve manufacturing jobs in the United States.
The Chinese government has resisted pressure to increase the value of the RMB, out of concern that it would cause Chinese jobs
to disappear and would also expose domestic banks to currency risks that they are not prepared to handle. The belief, which is
held by many economists, is that only fixed exchange rates or floating exchange rates are stable over the long term, because a one-time change in
exchange rates might cause speculators in the future to take positions on
possible exchange rate fluctuations which would lead to pressure to completely float the currency.
The Chinese government has also claimed that, while the PRC runs a large surplus with respect to the United States, its
overall balance of payments is not out of balance.
Some independent analysts conclude that Chinese currency is undervalued, because the People's Republic forbids citizens from
moving their currency abroad. If this sort of financial diversification were allowed, the massive outflow of yuan could have a
substantial effect on the currency.
Within the United States, the issue of appreciating the RMB is also controversial. Producers of manufactured goods and textiles are in favor of
appreciating the RMB. However, many American companies, such as aerospace
companies that depend on the Chinese import market for part of their profits, or computer manufacturers that depend on Chinese
factories for supply of some inexpensive components, are against appreciating the RMB. Furthermore, many economists have pointed
out that manufacturing jobs have been declining in the United States for decades. Some people have suggested that blaming the
lack of job growth on the value of the RMB is merely a convenient misdirection on the part of the vested interests, including the
Bush administration, and inefficient businesses labor unions fearful of competition.
The financial consequences of free valuation are complicated. Many economists believe that appreciation of the yuan would
cause the Chinese government to buy fewer United
States treasury bonds, causing interest rates to rise and hampering improvement in the U.S. economy. Likewise, a depreciation
might lead to an overheating American economy.
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