Renminbi

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Renminbi 人民币 (Chinese)
ISO 4217 Code	CNY
Official user(s)	People's Republic of China (mainland only)
Unofficial user(s)	Hong Kong  Macau
Inflation	8.7%
Source	National Bureau of Statistics of China, Feb 2008.
Pegged with	A basket of currencies
Subunit
1/10	jiao (角)
1/100	fen (分)
Symbol	¥
Nickname	kuài (块)
jiao (角)	máo (毛)
Plural	The language(s) of this currency does not have a morphological plural distinction.
Coins
Freq. used	1, 5 jiao, ¥1
Rarely used	1, 2, 5 fen
Banknotes
Freq. used	1, 5 jiao, ¥1, ¥5, ¥10, ¥20, ¥50, ¥100
Rarely used	2 jiao, ¥2
Central bank	People's Bank of China
Website	www.pbc.gov.cn

The renminbi (simplified Chinese: 人民币; traditional Chinese: 人民幣; pinyin: rénmínbì; literally "people's currency") is the currency of the mainland of the People's Republic of China (PRC).^[1], whose principal unit is the yuan (simplified Chinese: 元 or 圆; traditional Chinese: 圓; pinyin: yuán; Wade-Giles: yüan), subdivided into 10 jiao (角), each of 10 fen (分).

The renminbi is issued by the People's Bank of China, the monetary authority of the PRC.^[2] The ISO 4217 abbreviation is CNY, although also commonly abbreviated as "RMB". The Latinised symbol is ¥.

[edit] Etymology

See also: Chinese yuan

A variety of currencies circulated in China during the Republic of China era, most of which were denominated in the unit "yuan". Each was distinguished by a currency name, such as the fabi ("legal tender"), the "gold yuan", and the "silver yuan". The word yuan in Chinese literally means round, after the shape of the coins. The Korean and Japanese currency units, won and yen respectively, are cognates of the yuan and have the same Chinese character (hanja/kanji) representation, but in different forms (respectively, 원/圓 and 円/圓), also meaning round in Korean and Japanese. However, they do not share the same names for the subdivisions.

Renminbi means "people's currency". As the Communist Party of China took control of ever larger territories in the latter part of the Chinese Civil War, its People's Bank of China began in 1948 to issue a unified currency for use in Communist-controlled territories. Also denominated in yuan, this currency was identified by different names, including "People's Bank of China Bank Notes" (traditional Chinese: 中國人民銀行鈔票; simplified Chinese: 中国人民银行钞票; from November 1948), "New Currency" (traditional Chinese: 新幣; simplified Chinese: 新币; from December 1948), "People's Bank of China Notes" (traditional Chinese: 中國人民銀行券; simplified Chinese: 中国人民银行券; from January 1949), "People's Notes" (人民券, as an abbreviation of the last name), and finally "People's Currency", or "renminbi", from June 1949.^[3]

[edit] First series, 1948-1955

The first series of renminbi banknotes was introduced by the People's Bank of China in December 1948, about a year before the Chinese Communist Party's victory in the Chinese Civil War. It was issued only in paper money form and replaced the various currencies circulating in the areas controlled by the communists. One of the first tasks of the new government was to end the hyperinflation that had plagued China in the final years of the Kuomintang (KMT) era. That achieved, a revaluation occurred in 1955, at the rate of 1 new yuan = 10,000 old yuan.

[edit] Banknotes

Main article: First series of the renminbi

On December 1, 1948, the newly-founded People's Bank of China introduced notes in denominations of 1, 5, 10, 20, 50, 100 and 1000 yuan. Notes for 200, 500, 5000 and 10,000 yuan followed in 1949, with 50,000 yuan notes added in 1950. A total of 62 different designs were issued. The notes were officially withdrawn on various dates between April 1, 1955 to May 10, 1955.

These first renminbi notes were printed with the words "People's Bank of China", "Republic of China", and the denomination, written in Chinese characters by Dong Biwu.^[4]

The name "renminbi" was first recorded as an official name in June 1949. After work began in 1950 to design the second series of the renminbi, the previous series were retroactively dubbed the "first series of the renminbi".^[5]

[edit] Second renminbi yuan, 1955 -present

Chinese price sticker

The second series of renminbi banknotes was introduced in 1955. During the era of the command economy, the value of the renminbi was set to unrealistic values in exchange with western currency and severe currency exchange rules were put in place. With the opening of the mainland 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 centres, the exchange rate was brought to realistic levels and the dual track currency system was abolished.

The renminbi 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 in 1998, the PRC has been concerned that the mainland Chinese financial system would not be able to handle the potential rapid cross-border movements of hot money, and as a result, as of 2007, the currency trades within a narrow band specified by the Chinese central government.

[edit] Coins

In 1955, aluminium 1, 2 and 5 fen coins were introduced. In 1980, brass 1, 2, and 5 jiao and cupro-nickel 1 yuan coins were added, although the 1 and 2 jiao were only produced until 1981, with the last 5 jiao and 1 yuan issued in 1985. In 1991, a new coinage was introduced, consisting of an aluminium 1 jiao, brass 5 jiao and nickel-clad-steel 1 yuan. Issuance of the 1 and 2 fen coins ceased in 1991, with that of the 5 fen halting a year later^{[citation needed]}. The small coins were still made for annual mint sets, and from the beginning of 2005 again for general circulation. New designs of the 1 and 5 jiao and 1 yuan were introduced in between 1999 and 2002. The fen and jiao have become increasingly unnecessary as prices have increased. Chinese retailers tend to avoid decimal values (such as ¥9.99), opting instead for integer values of yuan (such as ¥9 or ¥10).^[6]

The use of coins varies from place to place. For example, coins are more often used for values less or equal to 1 yuan in Shanghai and Shenzhen but banknotes of the lower value are more often used than coins in Beijing and Xi'an.

[edit] Banknotes

Collection of Chinese yuan (renminbi) banknotes. ¹⁄₁₀ yuan to 10 yuan notes are of the fourth series of the renminbi. 20 to 100 yuan (red) are of the fifth series of the renminbi. The polymer note on the lower right commemorates the third millennium.

In 1955, notes (dated 1953), were introduced in denominations of 1, 2 and 5 fen, 1, 2 and 5 jiao, and 1, 2, 3, 5 and 10 yuan. Except for the three fen denominations and the 3 yuan, notes in these denominations continue to circulate, with 50 and 100 yuan notes added in 1980 and 20 yuan notes added in or after 1999.

The denomination of each banknote is given in the Chinese. The numbers themselves are given in financial Chinese numeral characters, as well as Arabic numerals. The denomination and the words "China People's Bank" are also given in Yi, Mongol, Tibetan, Uyghur and Zhuang on the back of each banknote. On the front of the note is also the representation of the denomination in Chinese braille starting from the fourth series.

[edit] Second series

Main article: Second series of the renminbi

The second series of renminbi banknotes (the first having been issued for the previous currency) was introduced on March 1, 1955. Each note has the words "People's Bank of China" as well as the denomination in the Uyghur, Tibetan, Mongol and Zhuang languages on the back, which has since appeared in each series of renminbi notes. The denominations available in banknotes were ¥0.01, ¥0.02, ¥0.05, ¥0.1, ¥0.2, ¥0.5, ¥1, ¥2, ¥3, ¥5 and ¥10.

[edit] Third series

Main article: Third series of the renminbi

The third series of renminbi banknotes was introduced on April 15, 1962. For the next two decades, the second and third series banknotes were used concurrently. The denominations were of ¥0.1, ¥0.2, ¥0.5, ¥1, ¥2, ¥5 and ¥10. The third series was phased out during the 1990s and then was recalled completely on July 1, 2000.

[edit] Fourth series

Main article: Fourth series of the renminbi

The fourth series was introduced between 1987 and 1997, although the banknotes were dated 1980, 1990, or 1996. They are still legal tender. Banknotes are available in denominations of ¥0.1, ¥0.2, ¥0.5, ¥1, ¥2, ¥5, ¥10, ¥50 and ¥100.

[edit] Fifth series

Main article: Fifth series of the renminbi

In 1999, a new series of renminbi banknotes and coins was progressively introduced. The fifth series consists of banknotes for ¥1, ¥5, ¥10, ¥20, ¥50 and ¥100.

[edit] Possible future design

On March 13, 2006, some delegates to an advisory body at the National People's Congress proposed to include Sun Yat-sen and Deng Xiaoping on the renminbi banknotes. However, the proposal is a long way from becoming law.^[7]

[edit] Use outside mainland China

The two special administrative regions, Hong Kong and Macau, have their own respective currencies. According to the "one country, two systems" principle and the basic laws of the two territories,^[8][9] national laws generally do not apply. Therefore, the Hong Kong dollar and the pataca remain the legal tenders in the two territories, and renminbi, although accepted, is not legal tender.

The RMB is the second most popular currency in Hong Kong and is becoming the principal trading currency in the region.^[10][11] Banks in Hong Kong allow people to maintain accounts in RMB.^[12]

The RMB had a presence in Macau even before the 1999 return to the People's Republic of China from Portugal. Banks in Macau can issue credit cards based on the renminbi but not loans. Renminbi based credit cards can not be used in Macau's casinos.^[13]

The current Republic of China government on Taiwan believes wide usage of the renminbi would create an underground economy and undermine its sovereignty.^[14] Tourists are allowed to bring in up to 20,000 renminbi when visiting Taiwan. These renminbi must be converted to the New Taiwan dollar at trial exchange sites in Matsu and Kinmen.^[15] The Chen Shui-bian administration insisted that it would not allow full convertibility until the mainland signs a bilateral foreign exchange settlement agreement,^[16] though president Ma Ying-jeou has pledged to allow full convertibility as soon as possible.

Cambodia and Nepal welcome the renminbi as an official currency and Laos and Myanmar allow it in border provinces. Though unofficial, Vietnam recognizes the exchange of renminbi to đồng.^[17]

[edit] Exchange rate

In the decade until 2005, China's currency had been tightly pegged at 8.2765 yuan to the U.S. dollar. On July 21, 2005, the People's Bank of China, revaluing the yuan to 8.11 per U.S. dollar,^[18] removed the peg to the dollar and moved to a managed floating exchange rate based on market supply and demand with reference to a basket of foreign currencies. The daily trading price of the U.S. dollar against the RMB in the inter-bank foreign exchange market would be allowed to float within a narrow band of 0.3% around the central parity published by the PBC; in a later announcement published on May 18, 2007, the band was extended to 0.5%.^[19] The PRC has stated that the basket is dominated by the U.S. dollar, euro, Japanese yen and South Korean won, with a smaller proportion made up of the British pound, Thai baht, Russian ruble, Australian dollar, Canadian dollar and Singapore dollar.

On June 12, 2008, the renminbi traded at 6.9015 yuan per U.S. dollar, which is an 19.92% increase and the highest rate since the removal of the peg. Earlier, on April 10, 2008, it traded at 6.9920 yuan per U.S. dollar, which is the first time in more than a decade that a dollar bought less than seven yuan.^[20]

Scholarly studies suggest that the yuan is undervalued on the basis of purchasing power parity analysis (see below).

[edit] Purchasing power parity

The World Bank estimated that, by purchasing power parity, one United States dollar was equivalent to approximately ¥1.9 in 2004.^[21]

The International Monetary Fund estimated that, by purchasing power parity, one United States dollar was equivalent to approximately ¥2.021 in 2004, ¥2.047 in 2005, ¥2.062 in 2006, and is expected to be equivalent to approximately ¥2.095 in 2007.^[22]

[edit] See also

• Chinese lunar coins
• Economy of the People's Republic of China

[edit] References

[edit] External links

• Don's World Coin Gallery - China
• Ron Wise's World Paper Money - China, Peoples Republic ^{Mirror site}
• Tables of Modern Monetary Systems by Kurt Schuler - Asia ^{Mirror site}
• The Global History of Currencies - China
• Global Financial Data data series - China Yuan Renmimbi
• Global Financial Data currency histories table ( Microsoft Excel format)
• (Chinese) (English) SinoBanknote
• How to detect counterfeit Chinese money
• Photographs of all Chinese currency and sound of pronunciation in Chinese
• What is the new Chinese currency regime?
• RMB current exchange rate and historical graphs
• Economist article on Chinese currency valuation
• Discussion on how the basket peg works
• Chinese Bill Tracking

[edit] News

• China Severs Its Currency's Link to Dollar, Washington Post, 21 July 2005
• China lifts currency basket lid, BBC, 10 August 2005
• 1, 2 and 5 fen banknotes to be withdrawn, from Xinhua online.

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