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Updated: 2006-09-29 09:14

The renminbi (literally "people's currency") or the yuan is the official currency in the mainland of the People's Republic of China (PRC). It is issued by the People's Bank of China, the monetary authority of the PRC. The official ISO 4217 abbreviation is CNY, although also commonly abbreviated as "RMB". The Latinised symbol is, while in Chinese it is usually written with the character.

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 Kuomintang era. A revaluation occurred in 1955 at the rate of 1 new yuan =10,000 old yuan.

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 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 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 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 2003, full convertibility remains a distant goal.

Renminbi units

The base unit of the renminbi is the yuan. As with Chinese numerals, this character has two forms -- a common simplified form () and a formal form () used to prevent alterations and accounting mistakes. One yuan is divided into 10 jiao (), and one jiao is divided into 10 fen (). So 3.45 yuan would be spoken of as "3 yuan 4 jiao 5 fen", as opposed to "3 yuan 45 fen". In colloquial usage, other names are frequently employed; see yuan for details.

The largest denomination of the renminbi is the 100-yuan note. The smallest is the 1-fen coin or note. One of the more interesting things to note is that all denominations are available as banknotes. The fen notes are now rather insignificant, and the design has not changed since 1953.

The word yuan is the usual translation for the word dollar, and the abbreviation RMB￥ is sometimes written as CN$.