Renminbi

The renminbi (sign: ¥; code: CNY) is the currency of the People's Republic of China (PRC),  whose principal unit is the yuan,  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. The ISO 4217 abbreviation is CNY, although also commonly abbreviated as "RMB". The Latinised symbol is ¥. As of December 28, 2008 its current value against the US Dollar is 6.8459 PRC Renminbi to 1 US Dollar.

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 banknotes" (from November 1948), "New Currency" (from December 1948), "People's Bank of China notes" (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.

Production and Minting
Renminbi currency production is carried about by a state owned corporation, China Banknote Printing and Minting (CBPMC) (中国印钞造币总公司) headquartered in Beijing. CBPMC uses a network of printing and engraving and minting facilities around the country to produce banknotes and coins for subsequent distribution. Banknote printing facilities are based in Beijing, Shanghai, Chengdu, Xi'an, Shijiazhuang, and Nanchang. Mints are located in Nanjing, Shanghai, and Shenyang. Also, high grade paper for the banknotes is produced at two facilities in Baoding and Kunshan. The Baoding facility is the largest facility in the world dedicated to developing banknote material according to its webite . In addition, the People's Bank of China has its own printing technology research division which researches new techniques for creating banknotes and making counterfeiting more difficult.

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 1 December 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 1 April 1955 to 10 May 1955.

These first renminbi notes were printed with the words " People's Bank of China", " Republic of China", and the denomination, written in Chinese characters by Dong Biwu.

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".

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 black markets 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. 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).

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
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.



Second series
The second series of renminbi banknotes (the first having been issued for the previous currency) was introduced on 1 March 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 15 April 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 1 July 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. Significantly, the fifth series uses the portrait of Mao Zedong on all banknotes, in place of the various leaders and workers which had been featured previously.

Commemorative Designs
In 1999, a commemorative red ¥50 note was issued in honor of the 50th anniversary of the establishment of the People's Republic of China. This note features Mao Zedong on the front and various animals on the back.

An orange polymer note, and so far, China's only polymer note, commemorating the new millennium was issued in 2000 with a face value of ¥100. This features a dragon on the obverse and the reverse has a sundial.

For the 2008 Beijing Olympics, a green ¥10 note was issued featuring the Bird's Nest on the front with the back showing a classical Olympic  discus thrower and various other athletes.

Possible future design
On 13 March 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.

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, national laws generally do not apply. Therefore, the Hong Kong dollar and the Macanese pataca remain the legal tenders in the two territories, and renminbi, although accepted, is not legal tender. Banks in Hong Kong allow people to maintain accounts in RMB.

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.

The current Republic of China government on Taiwan believes wide usage of the renminbi would create an underground economy and undermine its  sovereignty. 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. The Chen Shui-bian administration insisted that it would not allow full  convertibility until the mainland signs a bilateral foreign exchange settlement agreement, though president  Ma Ying-jeou has pledged to allow full convertibility as soon as possible.

The renminbi is circulated in many of China's neighbours. It is used quite widely in Mongolia. 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.

Value of the renminbi
For most of its early history, the RMB was pegged to the U.S. dollar at 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 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 (lowest 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 21 July 2005, the peg was finally lifted, which saw an immediate one-off RMB revaluation to 8.11 per USD. The exchange rate against the Euro stood at 10.07060 yuan per Euro.

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 18 May 2007, the band was extended to 0.5%. 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 10 April 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, and at 11.03630 yuan per Euro.

On 15 October 2008, the renminbi traded at 6.83170 yuan per U.S. dollar, which is a 21.8% increase and the highest rate since the removal of the peg. On the other hand, it traded at 9.19740 yuan per Euro, which corresponds roughly to rate at the time of the lifting of the peg against the US-Dollar.

Purchasing power parity
Scholarly studies suggest that the yuan is undervalued on the basis of purchasing power parity analysis.


 * The World Bank estimated that, by purchasing power parity, one United States dollar was equivalent to approximately ¥1.9 in 2004.


 * The International Monetary Fund estimated that, by purchasing power parity, one United States dollar was equivalent to approximately ¥3.462 in 2006, ¥3.547 in 2007, and is expected to be equivalent to ¥3.694 in 2008.

News

 * China Severs Its Currency's Link to Dollar, Washington Post, 21 July 2005
 * China lifts currency basket lid, BBC, 10 August 2005
 * 1, 2 and 5 fen banknotes to be withdrawn, from Xinhua online.