Renminbi
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The renminbi (Template:Zh-stpl) 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 the PRC. The official ISO 4217 abbreviation is CNY.
China's currency is tightly pegged at 8.28 renminbi to one dollar, making one yuan worth about one dime, and one jiao (or ten fen) worth about one penny. [1] (http://www.nytimes.com/2005/04/09/business/worldbusiness/09yuan.html)
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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 (pronounced YOO-en), 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.
The denomination of each banknote is given in Chinese. The numbers themselves are given in financial Chinese numeral characters, as well as Arabic numerals. The denomination is also given in Mongol, Tibetan, Uyghur and Zhuang on the back of each banknote.
Banknotes
- CNY 100
100 Renminbi Yuan issued in 1999
- 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:
- CNY 1
- CNY 0.5
- CNY 0.1
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 recognize 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 most recent new 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 fall also, 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 G7 and European Union are also in favour of a re-evaluation of the exchange rate.
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, computer manufacturers, discount retailers, and other companies that depend on Chinese factories to supply inexpensive products and 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 George W. Bush administration, inefficient businesses and 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 bond prices to fall and bond yields to rise, hampering improvement in the U.S. economy. The ensuing depreciation of the US dollar might price oil out of the reach of the american economy, causing stagflation, a collapse of US oil dependant industries, massive unemployment and other dire economic consequences.
See also
- Hong Kong dollar
- Pataca (the currency of Macao)
- New Taiwan dollar
External Links
- SinoBanknote (http://www.sinobanknote.com/)
- Photographs of all Chinese currency and sound of pronunciation in Chinese (http://www.thebeijingguide.com/money/money3.html)
- Economist article on Chinese currency valuation (http://www.economist.com/opinion/displaystory.cfm?story_id=2668182)
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