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Renminbi

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Renminbi
人民币 Template:Zh icon
File:Yuan collection.jpg
Subset of the 4th, 5th, and commemorative 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 (塊)
Denominations
Subunit
 1/10jiao (角)
 1/100fen (分)
Nickname
 jiao (角)máo (毛)
Banknotes¥1, ¥5, ¥10, ¥20, ¥50, ¥100
Coins1, 5 jiao, ¥1
Demographics
User(s)Mainland of the People's Republic of China
Issuance
Central bankPeople's Bank of China
 Websitewww.pbc.gov.cn
Valuation
Inflation5.9%
 SourceCIA World Fact Book, 2005 est.
Pegged withA basket of currencies

The renminbi (simplified Chinese: 人民币; traditional Chinese: 人民幣; pinyin: rénmínbì; lit. 'people's currency') or the yuan (Chinese: 元 or 圆; pinyin: yuán) 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.

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

Main article: First series of Renminbi banknotes

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
File:1948ChineseYuanFirst-1Yun-Front.jpg
Chinese Yuan First Series ¥1 Banknote Front Issued in 1948
File:1948ChineseYuanFirst-1Yun-Back.gif
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
File:1949ChineseYuanFirst-1Yun-Front.gif File: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

Main article: Second series of Renminbi banknotes

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)[1].

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

Main article: Third series of Renminbi banknotes

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)[1].

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

Main article: Fourth series of Renminbi banknotes

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), [1].

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

Main article: Fifth series of Renminbi banknotes

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 Template:Zh icon Value Dimensions Color Obverse Reverse Printed Date Issued Date Watermark
[1] ¥1 Template:Fn 130 x 63 mm Yellow Mao Zedong and Orchid Three Pools Mirroring the Moon at West Lake 1999 July 30, 2004 Orchid
[2] ¥5 135 x 63 mm Purple Mao Zedong and Narcissus Mount Tai November 18, 2002 Narcissus
[3] ¥10 140 x 70 mm Blue Mao Zedong and Rose Three Gorges of the Yangtze River September 1, 2001 Rose
[4] ¥20 (new value) 145 x 70 mm Brown Mao Zedong and Lotus Scenery of Guilin October 16, 2000 Lotus
[5] ¥50 150 x 70 mm Green Mao Zedong and Chrysanthemum Potala Palace September 1, 2001 Mao Zedong
File:ChinaPRP901-100Yuan-1999 a.jpg ¥100 155 x 77 mm Red Mao Zedong and Peony? Great Hall of the People October 1, 1999

Note:

  • Template:Fnb 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”(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

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

Banknote
5th Series, Second (2005) Edition
Link Template:Zh icon Value Dimensions Color Obverse Reverse Printed Date Issued Date Watermark
[6] ¥5 135 x 63 mm Purple Mao Zedong and Narcissus Mount Tai 2005 August 31, 2005 Narcissus
[7] ¥10 140 x 70 mm Blue Mao Zedong and Rose Three Gorges of the Yangtze River Rose
[8] ¥20 145 x 70 mm Brown Mao Zedong and Lotus Scenery of Guilin Lotus
[9] ¥50 150 x 70 mm Green Mao Zedong and Chrysanthemum Potala Palace Mao Zedong
[10] ¥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. [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.

Current CNY exchange rates
From Google Finance: AUD CAD CHF EUR GBP HKD JPY USD
From Yahoo! Finance: AUD CAD CHF EUR GBP HKD JPY USD
From XE.com: AUD CAD CHF EUR GBP HKD JPY USD
From OANDA: AUD CAD CHF EUR GBP HKD JPY USD

See also

References

  1. ^ a b c Peoples bank of china 2003-2004 currency year book, book 2, Currency of the Peoples Republic of China, in chinese.

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