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Renminbi

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Renminbi
人民币 Template:Zh icon
Renminbi banknotes of the 2005 series
ISO 4217
CodeCNY (numeric: 156)
Subunit0.01
Unit
PluralThe language(s) of this currency do(es) not have a morphological plural distinction.
Symbol¥
Nicknamekuài (块)
Denominations
Subunit
 1/10jiao (角)
 1/100fen (分)
Nickname
 jiao (角)máo (毛)
Banknotes
 Freq. used¥1, ¥5, ¥10, ¥20, ¥50, ¥100
 Rarely used¥0.1, ¥0.2, ¥0.5, ¥2
Coins
 Freq. used¥0.1, ¥0.5, ¥1
 Rarely used¥0.01, ¥0.02, ¥0.05
Demographics
Official user(s)Template:PRC-main
Unofficial user(s) Hong Kong
 Macau
Issuance
Central bankPeople's Bank of China
 Websitewww.pbc.gov.cn
Valuation
Inflation8.7%
 SourceNational Bureau of Statistics of China, Feb 2008.
Pegged withA basket of currencies

The renminbi (simplified Chinese: 人民币; traditional Chinese: 人民幣; pinyin: rénmínbì; lit. 'people's currency') is the currency of the People's Republic of China (PRC).[1], whose principal unit is the yuan (simplified Chinese: 元 or 圆; traditional Chinese: ; 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 ¥.

Etymology

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" (simplified Chinese: 中国人民银行钞票; traditional Chinese: 中國人民銀行鈔票; from November 1948), "New Currency" (simplified Chinese: 新币; traditional Chinese: 新幣; from December 1948), "People's Bank of China Notes" (simplified Chinese: 中国人民银行券; traditional Chinese: 中國人民銀行券; 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]

First renminbi yuan, 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.

Banknotes

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" (only in the context to show the issuance year in the Republic of China Era, which was then the official era in 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]

Second renminbi yuan, 1955 -present

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.

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.

Banknotes

"People's Bank of China" written in 5 different styles. From top to bottom and left to right: Mandarin pinyin, Mongol, Tibetan, Uyghur, and Zhuang languages.

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 "People's Bank of China" 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.

File:Yuan collection.jpg
Collection of Chinese yuan (renminbi) banknotes. 110 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.

Second series

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.

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 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.

Fourth series

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.

Fifth series

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.

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]

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 cannot 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]

Value of the renminbi

For most of its early history, the RMB was pegged to the U.S. dollar at an unrealistic level of 2.46 yuan per USD (note: during the 1970s, it was appreciated until it reached 1.50 yuan per USD in 1980). When China's economy gradually opened during the 1980s, the RMB was devalued in order to reflect its true market price (based on the black market trading) and to improve the competitiveness of Chinese export. Thus, the official RMB/USD exchange rate declined from 1.50 yuan in 1980 to 8.62 yuan by 1994 (worst ever on the record). Improving current account balance during the latter half of the 1990s enabled the Chinese government to maintain a peg of 8.27 yuan per USD from 1997 to 2005. On July 21, 2005, the peg was finally lifted, which saw an immediate one-off RMB revaluation to 8.11 per USD.[18] The RMB is now 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 People's Bank of China (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 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] On July 16, 2008, the renminbi traded at 6.8128 yuan per U.S. dollar, which is a 21.48% increase and the highest rate since the removal of the peg.

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

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]

Current CNY exchange rates

From Google Finance: AUD CAD CHF EUR GBP HKD JPY USD TWD KRW
From Yahoo! Finance: AUD CAD CHF EUR GBP HKD JPY USD TWD KRW
From XE.com: AUD CAD CHF EUR GBP HKD JPY USD TWD KRW
From OANDA: AUD CAD CHF EUR GBP HKD JPY USD TWD KRW

See also

References

  1. ^ Article 16, "The People's Bank of China Law of the People's Republic of China". 2003-12-27. {{cite web}}: Check date values in: |date= (help).
  2. ^ Article 2, "The People's Bank of China Law of the People's Republic of China". 2003-12-27. {{cite web}}: Check date values in: |date= (help)
  3. ^ 中华人民共和国第一套人民币概述
  4. ^ 中国最早的一张人民币
  5. ^ 中华人民共和国第一套人民币概述
  6. ^ Coldness Kwan (2007-03-06). "Do you get one fen change at Origus?". China Daily. Retrieved 2007-03-26. {{cite news}}: Check date values in: |date= (help)
  7. ^ Quentin Sommerville (13 March 2006). "China mulls Mao banknote change". BBC News, Shanghai. Retrieved 2007-03-18. {{cite web}}: Check date values in: |date= (help); Italic or bold markup not allowed in: |publisher= (help)
  8. ^ "The Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China". 1990-04-04. Retrieved 2007-03-23. Article 18: National laws shall not be applied in the Hong Kong Special Administrative Region except for those listed in Annex III to this Law. {{cite web}}: Check date values in: |date= (help)
  9. ^ "The Basic Law of the Macao Special Administrative Region of the People's Republic of China". 1993-03-31. Retrieved 2007-03-23. Article 18: National laws shall not be applied in the Macao Special Administrative Region except for those listed in Annex m to this Law. {{cite web}}: Check date values in: |date= (help)
  10. ^ "Chinese Renminbi: Strong Currency in Asia". China.org.cn. 2003-03-30. Retrieved 2007-01-13. {{cite news}}: Check date values in: |date= (help)
  11. ^ "China's renminbi goes global". chinagate.com.cn. 2003-07-07. Retrieved 2007-01-13. {{cite news}}: Check date values in: |date= (help)
  12. ^ "Hong Kong banks to conduct personal renminbi business on trial basis". Hong Kong Monetary Authority. 18 November 2003. Retrieved 2007-03-22. {{cite news}}: Check date values in: |date= (help)
  13. ^ "Macao gets green light for RMB services". China Daily. 2004-08-05. Retrieved 2007-03-22.
  14. ^ "Regular Press Briefing of the Mainland Affairs Council". Mainland Affairs Council. January 5, 2007. Retrieved 2007-03-21. {{cite news}}: Check date values in: |date= (help)
  15. ^ "CBC head urges immediate liberalization of reminbi conversion". Government Information Office, Taiwan. 2006-12-26. Retrieved 2007-03-21.
  16. ^ "Taiwan prepares to allow renminbi exchange". Financial Times. January 3, 2007. Retrieved 2007-03-13. {{cite news}}: Check date values in: |date= (help)
  17. ^ "RMB increases its influence in neighbouring areas". People's Daily. 2004-02-17. Retrieved 2007-01-13. {{cite news}}: Check date values in: |date= (help)
  18. ^ "Public Announcement of the People's Bank of China on Reforming the RMB Exchange Rate Regime". 2005-07-21. {{cite web}}: Check date values in: |date= (help)
  19. ^ "Public Announcement of the People's Bank of China on Enlarging the Floating Band of the RMB Trading Prices against the US Dollar in the Inter-bank Spot Foreign Exchange Market". 2007-05-18. {{cite web}}: Check date values in: |date= (help)
  20. ^ David Barboza (2008-04-10). "Yuan Hits Milestone Against Dollar". New York Times. Retrieved 2008-04-11. {{cite web}}: Check date values in: |date= (help)
  21. ^ World Bank: World Development Indicators 2006
  22. ^ IMF: World Economic Outlook Database, April 2007

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