The renminbi (Chinese: 人民币; pinyin: Rénmínbì; meaning "People's Currency"; Chinese pronunciation: [ʐə˧˥nmi˧˥npi˥˩]; symbol: ¥; ISO code: CNY; abbreviation: RMB), commonly referred to as the Chinese yuan, is the official currency of the People's Republic of China.[a] It is issued by the People's Bank of China, the nation's monetary authority.[3] As of April 2022, the renminbi ranks as the fifth-most-traded currency globally.[4]
The yuan (元) serves as the primary unit of the renminbi. One yuan is subdivided into 10 jiao (角), with each jiao further divided into 10 fen (分). In both domestic and international contexts, the term "yuan" is frequently used to refer to the Chinese currency as a whole.[b]
Valuation
Until 2005, the renminbi was pegged to the US dollar. During China’s transition from a centrally planned economy to a market-oriented system and its expansion in foreign trade, the renminbi was devalued to enhance the competitiveness of Chinese industries. At one point, the renminbi's official exchange rate was reported to be undervalued by up to 37.5% relative to its purchasing power parity (PPP).[5]
However, by the second half of 2012, appreciation measures by the Chinese government, along with quantitative easing policies implemented by the U.S. Federal Reserve and other major central banks, reduced the disparity, bringing the renminbi to within 8% of its estimated equilibrium value.[6] Since 2006, the renminbi has been allowed to float within a narrow margin around a fixed base rate, which is determined with reference to a basket of global currencies. The Chinese government has committed to gradually increasing the flexibility of this exchange rate.
The renminbi’s growing international presence led to its rise in the global currency market, becoming the world’s 8th most traded currency in 2013,[7] 5th by 2015,[8] but dropping slightly to 6th place by 2019.[9]
On October 1, 2016, the renminbi became the first currency from an emerging market to be included in the International Monetary Fund's (IMF) Special Drawing Rights (SDR) basket—a reserve currency basket used by the IMF. Its initial weighting in the SDR basket was 10.9%.[10][11]: 259
Current Exchange Rates
The exchange rates for CNY against major currencies (e.g., AUD, CAD, CHF, EUR, GBP, HKD, JPY, USD) are available from sources like Google Finance, Yahoo! Finance, XE.com, and OANDA.
Historical Trend
The USD/CNY exchange rate from 1981 to 2022 reflects significant changes aligned with China's evolving economic policies and market integration.
Terminology
The renminbi (人民币, pinyin: rénmínbì, meaning "people's currency") is the official currency of China, with the yuan (元 or 圆, pinyin: yuán) serving as its primary unit. The table below outlines formal and colloquial terminology associated with the currency:
| Chinese | Pinyin | English | Literal Translation |
|---|---|---|---|
| Formal currency name | 人民币 | rénmínbì | renminbi |
| Formal name for 1 unit | 元 or 圆 | yuán | yuan |
| Formal name for 1/10 unit | 角 | jiǎo | jiao |
| Formal name for 1/100 unit | 分 | fēn | fen |
| Colloquial name for 1 unit | 块 | kuài | kuai (or quay)[12] |
| Colloquial name for 1/10 unit | 毛 | máo | mao |
Currency Codes and Symbols
- The ISO code for the renminbi is CNY, derived from China's country code (CN) and the "Y" from yuan.[13]
- In Hong Kong, where renminbi trades at free-floating rates, the unofficial code CNH is used to differentiate these rates from those fixed by the Chinese central bank on the mainland.[14]
- The abbreviation RMB is not an official ISO code but is commonly used by banks and financial institutions.
- The currency symbol for the yuan is ¥. When distinction from the Japanese yen is necessary, RMB (e.g., RMB 10,000) or ¥ RMB (e.g., ¥10,000 RMB) is used.
In written Chinese, the character for yuan (元 or, formally, 圆) typically follows the number instead of a currency symbol.
Distinction Between Renminbi and Yuan
"Renminbi" refers to the currency as a whole, while "yuan" refers specifically to its primary unit. This distinction mirrors that between "sterling" and "pound" for the UK’s currency.[13] Subunits include the jiao (1/10 of a yuan) and the fen (1/100 of a yuan).
Everyday Usage
In casual conversation, kuai (块; "piece") is commonly used instead of "yuan," and mao (毛; "feather") replaces "jiao." For example, ¥8.74 might be expressed as 八块七毛四 (bā kuài qī máo sì) informally, while its formal reading would be 八元七角四分 (bā yuán qī jiǎo sì fēn).
Slang and Nicknames
The renminbi is occasionally nicknamed the "redback," a reference to the red hue of its banknotes and a play on "greenback," the slang term for the US dollar.[15]
History
Early Currency Origins
The renminbi (RMB) has its roots in the broader historical context of Chinese and regional currency evolution. The yuan, as a unit of currency, shares a lineage with various currencies in mainland China, Taiwan, Hong Kong, Macau, and Singapore, all of which trace back to the Spanish dollar. This silver coin was imported in significant quantities from Spanish America between the 16th and 20th centuries.
In 1889, the Qing dynasty introduced the silver dragon dollar, the first locally minted silver yuan widely accepted throughout China. Banknotes denominated in yuan followed, remaining convertible to silver dollars until 1935, when China abandoned the silver standard and introduced the fiat currency system known as fabi (法币), or "legal tender."
Introduction of the Renminbi
The renminbi was introduced by the People’s Bank of China in December 1948, replacing the disparate currencies circulating in areas under Communist control during the Chinese Civil War. Initially issued solely in paper form, the renminbi aimed to stabilize hyperinflation that plagued the late Kuomintang (KMT) era. Following the establishment of the People’s Republic of China in 1949, a revaluation was conducted in 1955, with 1 new yuan equaling 10,000 old yuan.
Command Economy Era (1949–1970s)
Under the planned economy of the early PRC, the exchange rate was intentionally overvalued to support an import-substitution strategy. This policy aimed to accelerate industrial development and reduce reliance on imported goods. Overvaluation allowed priority industries access to cheaper foreign machinery and equipment. However, strict currency controls limited international economic engagement.
Transition to Market Reforms (1980s–1990s)
China's shift to a market-oriented exchange rate system began in the late 1970s. A dual exchange rate system emerged, with separate rates for trade-related and non-trade-related transactions.
Key milestones include:
- 1979: Exporters retained a share of foreign exchange earnings via quotas.
- 1980: Introduction of swap centers, allowing exporters to trade excess foreign currency.
- 1994: Exchange rate unification, resulting in a significant devaluation of the renminbi to align it with market levels. The Foreign Exchange Certificate (FEC), a parallel currency used by tourists, was phased out.
Internationalization and Global Recognition
In 2015, the International Monetary Fund (IMF) included the renminbi in its basket of Special Drawing Rights (SDR) currencies, alongside the US dollar, euro, yen, and pound sterling. This marked a significant milestone in the renminbi’s internationalization.
Digital Renminbi
China began developing the digital renminbi (e-RMB) in the 2010s, releasing it for pilot use in 2019 under the name Digital Currency Electronic Payment (DCEP). The digital currency aims to enhance domestic payment systems and reduce reliance on the US dollar in international trade.
Key developments include:
- Integration into municipal systems, with some government employees receiving salaries in digital currency as of May 2020.
- Deployment during events such as the 2022 Beijing Winter Olympics.
- Filing of over 80 patents by the People’s Bank of China (PBOC) for blockchain integration, inflation controls, and digital wallets.
While the e-RMB represents a technological leap, analysts argue that China's financial system and strict capital controls hinder the currency's global adoption.
Recent Developments
- Interest Rate Swaps (2023): RMB-denominated interest rate swaps were launched in May 2023.
- Green Bonds: In June 2023, the Hong Kong Special Administrative Region (HKSAR) announced a significant green bond offering, denominated in USD, EUR, and RMB, as part of China's sustainability initiatives.
The renminbi's evolution reflects China's balancing act between maintaining domestic control and increasing its global economic influence. Further updates to its monetary policies and digital currency rollout will continue shaping its role in the global financial landscape.
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