|
The renminbi (Traditional Chinese: 人民幣, Simplified Chinese: 人民币,
literally means "people's currency") is the official currency of the People's Republic of China. It is issued by the
People's Bank of China, the monetary authority of
mainland China. The official ISO 4217 abbreviation is CNY.
Renminbi units
The base unit of the renminbi is the yuan. Yuan is casually written as
元. It is formally written as 圆 to prevent counterfeiting. The currency name renminbi is sometimes confused
with the base unit name yuan. Yuan is also sometimes regarded as
dollar, and the abbreviation RMB￥ is sometimes written as CN$.
One yuan is divided into 10 jiao (角). 1 jiao is divided into 10 fen (分). The
largest denomination of renminbi is 100 yuan. The smallest is 1 fen.
In Mandarin Chinese, yuan is also commonly called
kuai (块). jiao is also commonly called mao (毛).
In the PRC, prices are usually marked with ￥ in front of the price and occasionally with 元 at the end of the
price.
Very often, the formal numerals characters are used in writing to prevent counterfeiting and accounting mistakes. Please refer
to Chinese numerals for more information.
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 KMT era.
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 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 of 1998, the PRC has been concerned that the 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.
Exchange rate of the dollar vs. the renminbi
Since 1994, the policy on currency has been to informally peg 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 also fall making Chinese exports more competitive. This led to some pressure on the PRC from the United States to increase the value 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.
The Chinese government has resisted pressure to increase the value of the RMB, out of concern that it would cause Chinese jobs
to disappear and would also expose domestic banks to currency risks that they are not prepared to handle. The belief, which is
widely held by economists, is that only fixed exchange rates or floating exchange rates are stable over the long term, because a
one-time change in exchange rates would cause speculators in the future to take positions on possible exchange rate fluctuations
which would lead to pressure to completely float the currency.
The Chinese government has also pointed out that, while the PRC runs a large surplus with respect to the United States, its
overall balance of payments is not out of balance.
Within the United States, the issue of appreciating the RMB is also controversial. Producers of manufactured goods and
textiles are in favor of appreciating the RMB. However, many American companies, such as aerospace companies that depend on the
Chinese import market or computer manufacturers that depend on Chinese factories for supply, are against appreciating the RMB.
Furthermore, many economists have pointed out that manufacturing jobs have been declining in the United States for decades, and
some people, both in China and the United States, 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 Bush
administration. Finally, many economists believe that appreciation of the yuan would cause the Chinese government to buy fewer
United
States treasury bonds, causing interest rates to rise and preventing any improvement in the U.S. economy.
See also
|