Overview of the Yuan and Renminbi
There are several reasons why Chinese currency is a hot topic right now. It not only describes the state of one of the largest economic superpowers in the world, but it also plays a key role in one of the most contentious issues surrounding China in the present: the country’s alleged mercantilist practice of artificially undervaluing its currency in relation to the US dollar in order to give its exports an unfair price advantage.
The Chinese Yuan (CNY) and the people’s renminbi are the two names for money in China (RMB). The yuan serves as the primary unit of account for the renminbi, which is the official currency of China. This distinction is subtle.
Round or round objects are denoted by the character yuan in Mandarin Chinese. The silver Spanish dollars that European traders introduced in the seventeenth and eighteenth centuries were also referred to by this term.
China started producing its own silver yuan coins in 1889.
Both the early Republican administration and the Qing Dynasty issued silver yuan coins and banknotes for use in commerce. The New Taiwan Dollar, the Hong Kong Dollar, the Singapore Dollar, and the Macanese Pacata are just a few examples of modern currencies that use the traditional character for yuan.
The current Chinese Yuan is abbreviated CNY to distinguish it from other uses of the word and the mainland currency. For instance, forex firms will use the ticker CNY to quote prices.
100 yuan is the largest banknote, and it is followed by 50, 20, 10, 5, and 1 yuan. There are two subunits of one yuan: jiao and fen. A yuan is made up of 10 jiao (equivalent to dime in a dollar) and 10 fen.
In December 1948, just over a year before it overthrew the Kuomintang government, the communist party formed the People’s Bank of China during the Chinese Civil War.
The Chinese economy, which had previously been split among various regional currencies, could now be unified under the new leadership thanks to the new currency. It also set the new administration apart from the outgoing one, whose policies had resulted in severe hyperinflation. Each yuan in the new series replaced 10,000 of the previous ones when the RMB was revalued in 1955 at a rate of 10,000 to 1. 5
The RMB’s value was strictly controlled during the command economy, with one yuan tied to 2.46 U.S. dollars until 1971. The PBOC permitted the yuan to trade on foreign markets as the Chinese economy started to open up to the global market, while the floating exchange rate was remained strictly regulated.
Six Major Differences
Many people continue to be confused about Beijing’s consideration of the internationalization of its currency. Are there two currencies in China? Does it use the renminbi (RMB), the yuan (CNY), or both?
The People’s Republic of China’s official currency is the renminbi, which in Mandarin means “people’s currency.” A unit of currency is a yuan. According to a common comparison, the renminbi is the name of China’s currency, much as sterling is the name of Great Britain’s currency. Yuan is the fundamental unit of renminbi, much as the pound is the fundamental unit of sterling.
Yuan and renminbi are frequently used interchangeably. Similar to how Americans use “bucks” to refer to dollars, a storekeeper in China may likewise communicate costs in terms of kuai, which means “pieces,” when you go shopping.
According to the ISO 4217 standard, CNY is the recognized currency acronym for the Chinese Yuan.
RMB, however, is frequently used as an informal shorthand. In addition, the Chinese Yuan may trade for a different price in foreign markets, such as Hong Kong, as a result of China’s cross-border currency regulations. The unofficial term CNH is occasionally used to refer to the offshore price of the Chinese Yuan in order to differentiate between these two prices.