The renminbi – it’s the official currency of the People’s Republic of China (PRC), and one of the most important in the world today. You may have heard of the ‘yuan’ before but technically that is just the base unit of the renminbi. Yuan roughly translates to ‘dollar’ or ‘pound’, whereas renminbi can be taken to mean ‘sterling’. For our purposes, we’ll use the official ‘renminbi’ or the currency code (CNY) when talking about the currency itself (post 1948), and ‘yuan’ when referring to specific denominations or the currency pre-1948. The currency is also abbreviated as RMB in some cases, though we won’t use that since it’s already confusing enough.
Fast Facts: Renminbi
- China Renminbi Symbol: ¥
- Chinese Renminbi Currency Code: CNY
- Coins: ¥0.01, ¥0.02, ¥0.05, ¥0.1, ¥0.5, ¥1
- Notes: ¥0.2, ¥1, ¥5, ¥10, ¥20, ¥50, ¥100
- Chinese GDP (nominal): $10.38 trillion (2nd)
- Central Bank: People’s Bank of China
China and currency go back together at least 3000 years, with cowry shells the earliest known form. The first Emperor Qin Shi Huang (260-210 BC) was the first to introduce a uniform coin. These coins were also unique in that they had holes in the middle in order to make them easier to transport and count. China is also credited with inventing paper money in the 9th century, though coins remained the main currency for many centuries after.
The Chinese yuan was introduced in 1889, with an exchange rate on par with the Mexican peso. At the end of the Qing Dynasty, military currencies were issued across different regions – though the Silver Dollar was eventually declared the national currency in 1914. The period of the Republic saw many different currencies and amendments to this. Some were tied to the gold standard, others to the silver standard. Various currencies were also issued in different regions and through a variety of means during the Japanese occupation.
All the efforts of the nationalist government to find the right currency would eventually be for naught when, in 1948, the Communist Party of China founded the People’s Bank of China and the renminbi. For a time, 100,000 gold yuan could be exchanged for 1 renminbi. Today, the renminbi is used throughout mainland China. It is also unofficially used and easily exchanged in Hong Kong and Macau – though they use the Hong Kong dollar and the Macanese pataca respectively.
Notes and Coins
The long history of currency before the Communist Party came to power featured many different coins and notes. The variety of materials and variation amongst regions is also staggering, so we’ll focus on the notes and coins of the ‘renminbi’ specifically.
There have been five series of banknotes issued by the government since December 1, 1948. The first series was a reflection of the chaotic time, with many different versions issued. Workers, peasants, and factories were all featured on various notes. The second, third, and fourth series have included a wide range of designs including flowers, trains, ships, mountains, Tiananmen, the Yangtze, the Great Wall, and the PRC’s emblem. The current (fifth) series was introduced starting in 1999. The most obvious feature is that all notes have an image of Mao Zedong on the front. Each denomination is differentiated by colour, a different flower/plant, and landmark or location on the reverse. These include the Potala Palace in Tibet, Guilin, and the Yangtze, among others. The current coins also feature flowers, as well as being made of different materials.
The currency’s denominations have also evolved over the years. Coins for ¥0.01, ¥0.02, ¥0.05 and notes for ¥0.2 are not included in the current series. They are still used, albeit rarely.
Value: CNY per USD
The CNY was pegged at 2.46 CNY per USD initially. This changed throughout the 70’s, with the value reaching 1.50 CNY per USD by 1980. Following this, the CNY was largely devalued as China became more competitive in the global market. This resulted in the value falling to 8.62 CNY per USD in 1994 (the lowest it’s ever been). From 1997-2005, a peg was maintained at 8.27 CNY per USD.
The peg was removed in 2005, though it would later be reinstated in order to combat the recent Global Financial Crisis. In 2010 China announced they would take steps to increase the exchange rate of the CNY and remove the peg once again. This was welcome news for Western countries, particularly the United States. For years, there has been much debate about the perceived undervaluation of the CNY, which is done in order to increase the competitiveness of Chinese goods. By allowing the currency to exist on a managed float regime, the US is hopeful that the value of the CNY will more closely reflect what its actual worth is. Still, the IMF suggests the currency is undervalued between 5-27%.
The Chinese economy is either the second or first largest in the world, depending on whether you are measuring by nominal GDP (Gross Domestic Product) or PPP (Purchasing Power Parity) respectively. Over the last 30 years, China’s has been one of the fastest growing economies in the world with growth averaging around 10% (although this slowed to 7.4% last year). The economy is designated by the government as a socialist market economy – meaning that the state-owned sector is dominant in an open-market economy.
Manufacturing is one of the most important sectors in China. It’s the largest goods exporter in the word as well as the second largest importer – making China the largest trading nation in the world. The importance of trade is clearly visible in the country’s massive container ports – which account for seven (including Hong Kong) of the world’s ten largest, with Shanghai at number one.
Other important sectors include agriculture, energy, and services, including the rapidly expanding tourism industry (the service industry is the third largest in the world behind the US and Japan). Agriculture in China has a very high yield, exceeding that of the US despite less arable land. As far as resources go, China is home to an abundance of coal, which is used for 70% of all energy consumption, as well as some large oil reserves. Despite China’s huge amount of hydrocarbon reserves, the country has had to import huge quantities of oil, gas and coal to cope with its massive growth – recently surpassing the US as the largest oil importer in the world. China is much more than just a manufacturer and exporter of goods, it is a growing, increasingly high-tech and dynamic economy.
China is already being hailed by some as the world’s largest economy, so it’s not difficult to imagine that it will continue to play a massive role in future of the global economy. With a large focus on manufacturing and exports, as well as a huge market for foreign investors and companies, the Chinese economy will continue to grow at home and abroad – and with that, China is poised to potentially pass the US as the world’s largest economic superpower.
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