The renminbi (人民幣 literally means "people's currency") is the official currency of the People's Republic of China. The official ISO 4217 abbreviation is CNY. It is sometimes confused with the yuan (as dollar), which is the currency's base unit and using CN$ instead of CNY in USA. The RMB base unit yuan is also sometimes regarded as dollar and RMB￥ as CN$.
In the PRC, prices are usually marked with ￥ in front of the price and occasionally with 元 at the end of the price.
It is issued by People's Bank of China, the monetary authority of mainland China. 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 convertable 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 distant goal.
Since 1994, currency policy 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 long term stable, 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 who depend the Chinese import market or computer manufacturers who 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 both in China and the United States have suggested that the 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, which would case interest rates to rise, which would prevent any improvement in the U.S. economy.
Its base unit is yuan. yuan is casually written as 元. It is formally written as 圆 to prevent counterfeiting. 1 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).
Very often, the formal numerals characters are used in writing to prevent counterfeiting and accounting mistakes. Please refer to Chinese numerals for more information.