Renminbi
The
renminbi () or the
yuan () is the official
currency in the
mainland of the
People's Republic of China (PRC). It is issued by the
People's Bank of China, the monetary authority of the PRC. The official
ISO 4217 abbreviation is CNY, although also commonly abbreviated as "RMB". The Latinised symbol is ¥, while in Chinese it is usually written with the
character 元.
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. A revaluation occurred in
1955 at the rate of 1 new yuan =10,000 old yuan.
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 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 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 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 2003, full convertibility remains a distant goal.
The base unit of the renminbi is the
yuan. As with
Chinese numerals, this character has two forms " a common simplified form (元) and a formal form (圆/") used to prevent alterations and accounting mistakes. One
yuan is divided into 10
jiao ('), and one
jiao is divided into 10
fen (分). So 3.45 yuan would be spoken of as "3
yuan 4
jiao 5
fen", as opposed to "3
yuan 45
fen". In colloquial usage, other names are frequently employed; see
yuan for details.
The largest denomination of the renminbi is the 100-
yuan note. The smallest is the 1-
fen coin or note. One of the more interesting things to note is that all denominations are available as banknotes. The
fen notes are now rather insignificant, and the design has not changed since
1953.
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
round object. The Korean and Japanese currency names,
won and
yen respectively, are
cognates of the
yuan and have the same
Chinese character (
hanja/
kanji) representation, but in different forms (respectively, 원/" and 円), also meaning
round in
Korean and
Japanese. However, they do not share the same names for the aforementioned subdivisions.
Although shop prices in the PRC are usually marked with 元 after the digits, a Y with one (Ұ) or two crossbars (¥) before the numeral digits is also common.
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 and the words 'China People's Bank' are also given in
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.
The use of coins varies from places to places. For example, coins are more often used for values less or equal to ¥1 in
Shanghai, but banknotes of the lower value are more often used than coins in
Beijing.
First series
The first series of Renminbi banknotes was introduced during the
Chinese Civil War by the newly-founded
People's Bank of China on
December 1,
1948, nearly one year before the founding of the
People's Republic of China itself. It was ceased on
May 10,
1955. It was issued to unify and replace the various currencies of the communist-held territories as well as the currency of the Nationalist government.
Due to the turbulent political situation at the time, the first series is rather chaotic, with many versions issued for each denomination. The banknotes show a mixture of agricultural and industrial scenes, modes of transportation, and famous sites.
The notes were issued in twelve denominations: ¥1, ¥5, ¥10, ¥20, ¥50, ¥100, ¥200, ¥500, ¥1,000, ¥5,000, ¥10,000 and ¥50,000, with a total of 62 designs.
Images of Reminbi First Series Banknotes | Chinese Yuan First Series ¥1 Banknote Front Issued in 1948 |
| | Chinese Yuan First Series ¥1 Banknote Back Issued in 1948 |
| Front design: a worker and a peasant Main color of Front: blue and pink
Back design: decorative pattern
Main color of Back: light coffee Size: 133 mm * 54 mm |
| 1949ChineseYuanFirst-1Yun-Front.gif |
| | 1949ChineseYuanFirst-1Yun-Back.gif |
| Front design: factory Main color of Front: light blue and reddish blue
Back design: decorative ball
Main color of Back: pale purple Size: 116 mm * 56 mm |
Second series
The second series of Renminbi banknotes was introduced on
March 1,
1955. Together with the introduction of the second series, the decimal point was moved 4 places to the right. As a result, one first series ¥10,000 note is equivalent to one second series ¥1 note.
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 were (withdrawn date):
*
¥0.01,
¥0.02,
¥0.05,
*
¥0.1(15/12/1967),
*
¥0.2(11/1953),
*
¥0.5(1/1/1999),
*
¥1 red(20/10/1969) blue(issued:25/3/1961, withdrawn 15/8/1973) ,
*
¥2(12/1976),
¥3(15/5/1964),
*
¥5 red(15/5/1964) blue(issued period:20/4/1962-1/12/1983) and
*
¥10(issued period:1/12/1957-15/4/1964)
[ Peoples bank of china 2003-2004 currency year book, book 2, Currency of the Peoples Republic of China, in chinese. ].
The ¥3, ¥5 and ¥10 notes were printed in the
Soviet Union. As a result of the
Sino-Soviet split, the use of them was halted in 1964 to be withdrawn.
Since 1999, only the three ¥0.01, ¥0.02, and ¥0.05 banknotes continue to be legal tender. The sizes of these three notes are very small compared to other banknotes.
Third series
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 available with either of these
catalog number(issued date-withdrawn date) added:
*
¥0.1 3|1(20/4/1962-20/11/1971), 3|2(31/10/1966-12/1067) 3|3-6(15/12/1967),
*
¥0.2 (15/4/1964),
*
¥0.5 (5/1/1974),
*
¥1 (20/10/1969),
*
¥2 (15/4/1964),
*
¥5 (20/10/1969),
*
¥10 (10/1/1966)
.
The third series was phased out over the 1990's and recalled completely on the 1/7/2000, this date is valid for all of the denomination's with only one date provided.
Fourth series
The fourth series was introduced between
1987 and
1992, although the banknotes were dated
1980,
1990, or
1996. Unlike the third series, they are still legal tender. Banknotes are available in (issue date):
*
¥0.1(22/9/1988),
*
¥0.2 (10/5/1988),
*
¥0.5 (27/4/1987),
*
¥1 (10/5/1988),
*
¥2 (10/5/1988),
*
¥5 (22/9/1988),
*
¥10 (22/9/1988),
*
¥50' (27/4/1987), and
*
¥100 (10/5/1988),
.
and newly deisgned coins of ¥0.1, ¥0.5, and ¥1.
All of the banknotes feature
geographical features of China on the reverse side. On the obverse side, banknotes less or equal to ¥10 feature different
ethnicities of China; the ¥50 note features an intellectual, a farmer, and an industrial worker, a typical communist theme; while the ¥100 note features four people important to the founding the People's Republic of China:
Mao Zedong,
Zhou Enlai,
Liu Shaoqi, and
Zhu De.
Coins carry the
Emblem of the People's Republic of China, the full title of the state in
Chinese and
pinyin on the obverse side, and the denomination and an image of a flower on the reverse side.
Fifth series
In 1999, a new series of renminbi banknotes and coins were progressively introduced.
First (1999) edition
Coins of the first edition replaces all 3 values from the previous series, namely ¥0.1, ¥0.5, and ¥1. It should be noted that the
Emblem of the People's Republic of China of the previous series has been removed and the title of the state has been replaced "
People's Bank of China". 1 jiao (¥0.1) also shrunk in size.
The first edition includes the following banknotes
Note:* The ¥1 note, introduced on
July 30,
2004, can also be argued as a member of the second edition because it shares similar new security features that are introduced in the banknotes of the second (2005) edition.
The new banknotes incorporate several measures to foil
counterfeiting, including
watermarks and inks that
fluoresce under
ultraviolet light. All but the ¥1 banknote have a metallic strip, and the ¥50 and ¥100 banknotes also feature numbers which change colour when viewed from different angles. The portrayals of different
nationalities of China, represented by a couple in ethnic dress on the front of previous banknotes, have also been uniformly replaced with the image of
Mao Zedong.
Second (2005) edition
The 2005 edition was introduced since
August 31,
2005 with the following banknotes and coin affected:
* banknotes: ¥100, ¥50, ¥20, ¥10, and ¥5
* coins: ¥0.1
There is no difference in the basic color and design between the banknotes of the 1999 and 2005 edition. However, new security (anti-counterfeit) features are added in the 2005 edition that distinguishes the two. The differences as compared to the 1999 edition are
* Dated 2005
* The currency number at the bottom of the reverse is added with
"YUAN" indicating the
pinyin of "dollar"(") in
Chinese language.
* Added
EURion constellation to avoid computer-aided
counterfeit* Removal of fiber threads
* Removal of the second serial number on ¥50 and ¥100
* More raised ink printing (on the right side of obverse)
* Move of registration
The material of the new ¥0.1 coin (
image) is
stainless steel, switching from
duralumin, a kind of metal
alloy.
Banknotes of the second (2005) edition include
Possible future design
On
March 13,
2006,
BBC reported that 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.
Mainland China's currency, which for the previous decade had been tightly pegged at 8.28 renminbi to the
U.S. dollar, was revalued on
July 21,
2005 to 8.11 per U.S. dollar, following the removal of the peg to the US dollar and pressure from the United States. The People's Bank of China also announced that the renminbi would be pegged to a
basket of foreign currencies, rather than being strictly tied to the U.S. dollar, and would trade within a narrow 0.3% band against this basket of currencies. The PRC has stated that the basket is dominated by the
U.S. dollar,
Euro, 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.
Purchasing power
The
World Bank's
World Development Indicators 2005 estimates that one
United States dollar is equivalent to approximately 1.8 Renminbi by
purchasing power parity in 2003. [
11]
Controversy: Is the renminbi undervalued?
The undervalued yuan is one important cause of China's credit boom and rising inflation. China's capital controls are porous, and investors all over Asia are betting on a currency revaluation by buying property in Shanghai or Beijing or putting their money into yuan deposits to take advantage of interest rates higher than the paltry level available in America. The yuan has been more or less pegged against the dollar since 1995. If, as a result of capital inflows, there is an excess supply of foreign currency, the central bank must buy it and sell yuan to keep the exchange rate stable. This injects new liquidity into the banking system, thereby feeding the credit boom. The central bank has been issuing bonds to mop up the liquidity, but this "sterilisation" is getting harder as the amounts swell. The bank has had trouble selling enough bonds in recent months, so the money supply continues to surge.
China's pegged exchange rate is not only causing problems at home. America accuses China of stealing jobs by keeping the yuan artificially low. In fact, it is not so clear that the yuan is undervalued. On the basis of purchasing-power parity (ie, relative prices) it does look undervalued. But almost all poorer countries look cheap by this gauge, and over the past decade China's real exchange rate has risen. Andy Xie, an economist at Morgan Stanley, calculates that, in real terms, the yuan has risen by 40-50% against both the dollar and the euro since 1993.
But what about another apparently telling piece of evidence: China's huge trade surplus with America? This, argue American politicians, proves that the yuan is undervalued. In fact it does not. China's overall trade balance was in deficit in the first three months of this year, thanks to strong import growth.
A third argument is that China's large surplus on its basic balance (the sum of the current-account and net foreign direct investment) and its huge build-up of foreign reserves are both symptoms of currency undervaluation. Mr Xie again disagrees. The increase in reserves, he argues, partly reflects speculative capital inflows. Moreover, if the capital account was opened (which is unlikely over the next four or five years), allowing firms and households to hold foreign assets, the yuan would probably fall, not rise, as the Chinese diversified their savings.
These arguments help to explain why the Chinese have so far ignored American demands to revalue their currency. It is not just crude mercantilism; there is much uncertainty about the yuan's correct value. The Chinese government says it will move towards a more flexible exchange rate in the medium term, but for the moment it wants to keep the yuan stable in order to support broader economic stability. Yet in fact, a flexible exchange rate can offer more stability, partly by providing a safety valve which helps to protect the real economy.
The strongest argument for a revaluation now is not that the yuan is undervalued, but that an adjustment would halt speculative capital inflows and so mop up the excess liquidity. It would be unwise for China to float the yuan until it has cleaned up its banking system, but it could repeg against the dollar at a higher rate and shift to a currency basket, which is what the government has said it would like to do. The snag, however, is that a small revaluation of only 5% might encourage expectations of a further appreciation and attract more capital inflows. Any revaluation would need to be large enough, say 10-20%, to head off such speculation. But a rise of such proportions would be unacceptable to the government, so the yuan is likely to remain fixed for the moment.
*
Hong Kong dollar*
Macanese pataca*
New Taiwan dollar*
Currencies related to the euro*
SinoBanknote*
How to detect counterfeit Chinese money*
Banknotes of China*
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*
Buy Chinese Yuan?*
China Severs Its Currency's Link to Dollar,
Washington Post,
21 July 2005*
China lifts currency basket lid, BBC,
10 August 2005
