Renminbi
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The renminbi (; ; ; literally "people's currency") 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 ¥ or Ұ, while in Chinese it is usually written with the character (unicode character reference: 元h ).
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. 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.
Renminbi units
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/圓) used to prevent alterations and accounting mistakes. One yuan is divided into 10 jiao (角), 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/圓 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.
RMB series
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.
| 
| 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 |
| 
| 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. .
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 bankotes 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).
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), .
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
| Banknote | ||||||||
|---|---|---|---|---|---|---|---|---|
| 5th Series, First (1999) Edition | ||||||||
| Link () | Value | Dimensions | Color | Obverse | Reverse | Printed Date | Issued Date | Watermark |
| [link] | 130 x 63 mm | Yellow | Mao Zedong and Orchid | Three Pools Mirroring the Moon at West Lake | 1999 | July 30, 2004 | Orchid | |
| [link] | ¥5 | 135 x 63 mm | Purple | Mao Zedong and Narcissus | Mount Tai | November 18, 2002 | Narcissus | |
| [link] | ¥10 | 140 x 70 mm | Blue | Mao Zedong and Rose | Three Gorges of the Yangtze River | September 1, 2001 | Rose | |
| [link] | ¥20 (new value) | 145 x 70 mm | Brown | Mao Zedong and Lotus | Scenery of Guilin | October 16, 2000 | Lotus | |
| [link] | ¥50 | 150 x 70 mm | Green | Mao Zedong and Chrysanthemum | Potala Palace | September 1, 2001 | Mao Zedong | |
| [link] | ¥100 | 155 x 77 mm | Red | Mao Zedong and Peony? | Great Hall of the People | October 1, 1999 | ||
Note:
- Note 1: 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.
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
- Dated 2005
- The currency number at the bottom of the reverse is added with “YUAN” indicating the pinyin of “dollar”(圓) 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
Banknotes of the second (2005) edition include
| Banknote | ||||||||
|---|---|---|---|---|---|---|---|---|
| 5th Series, Second (2005) Edition | ||||||||
| Link () | Value | Dimensions | Color | Obverse | Reverse | Printed Date | Issued Date | Watermark |
| [link] | ¥5 | 135 x 63 mm | Purple | Mao Zedong and Narcissus | Mount Tai | 2005 | August 31, 2005 | Narcissus |
| [link] | ¥10 | 140 x 70 mm | Blue | Mao Zedong and Rose | Three Gorges of the Yangtze River | Rose | ||
| [link] | ¥20 | 145 x 70 mm | Brown | Mao Zedong and Lotus | Scenery of Guilin | Lotus | ||
| [link] | ¥50 | 150 x 70 mm | Green | Mao Zedong and Chrysanthemum | Potala Palace | Mao Zedong | ||
| [link] | ¥100 | 155 x 77 mm | Red | Mao Zedong and Peony Bauhinia ? | Great Hall of the People | |||
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.Exchange rate
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, 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.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. [link]Controversy on USD-CNY exchange rate: Is the renminbi undervalued?
From 1994 until July 2005, the policy on currency has been to peg informally 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 mainland Chinese exports more competitive. This led to some pressure on the PRC from the United States to increase the value of 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 and a smaller trade deficit with mainland China. The G8 and European Union are also in favour of a re-evaluation of the exchange rate.
The PRC government has resisted pressure to increase the value of the RMB, out of concern that it would cause mainland Chinese jobs to disappear and would also expose domestic banks to currency risks that they are not prepared to handle. Many economists believe 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 PRC government has also claimed that, while mainland China 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 mainland Chinese currency is undervalued, because the People's Republic forbids citizens from moving more than 10,000 RMB 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. Manufacturers and textile producers are in favor of appreciating the RMB. However, many American companies that depend on mainland Chinese factories to supply inexpensive products and components, such as aerospace companies, computer manufacturers, discount retailers, and other companies 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.
However, the potential risk to global balances from mainland China’s inflexible exchange rate would be more critical if the PRC relaxed its controls on short-term investment flows without first introducing exchange rate flexibility. This is because shifting exchange rates nullify expected profits from investment flows seeking to take advantage of higher interest rates in another country. Without flexibility, speculative flows could quickly become large, as they did during the Asian financial crisis, and threaten economic stability and orderly world trade.
See also
External links
- () () [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
References
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