China money, Chinese money

By: EconomyWatch   Date: 30 June 2010

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The currency of China or Chinese money is called the Renminbi, which stands for the people’s currency. Renminbi abbreviates to RMB and is represented using the latinized symbol ¥, which it shares with the Japanese Yen. Yuan is the principal unit of Chinese money, which comprises of 10 jiao, that can be further divided into 10 fen.

The People's Bank of China is the issuing authority of the renminbi. Paper yuan is available in 1, 2, 5, 10, 50 and 100 yuan notes. Paper jiao is available in the form of 1, 2, and 5 jiao notes. Fen notes (1 and 2) do not have any purchasing power and are seldom used.

China Money: Exchange Rate

The Chinese yuan has been through a series of ups and downs, which is apparent through following figures:

  • 2.46 yuan per US dollar in the 1970s


  • 1.50 yuan per US dollar in 1980


    • 8.62 yuan per US dollar in 1994


    • 8.27 yuan per US dollar from 1997 to 2005


    • 6.9920 yuan per US dollar in 2008

    China’s balance of trade is easily affected if the renminbi’s real effective exchange rate fluctuates. Nonetheless, the imbalance cannot only be addressed by the exchange rate policy, given the trade surplus size. The appreciation in the renminbi hardly has any effect on Chinese imports, since imports have been declining rather than increasing. Due to this, a possible reduction in the surplus of trade remains limited.

    China Money Supply

    China, the third largest economy in the world, has become a powerhouse by surging ahead even in the slowdown. The banks in the country, most of which are state-owned, have met the 5 trillion yuan target, set by the Chinese government regarding loans, ahead of schedule.

    If we look at the situation in 2008, due to slow bank lending and business activity there was a drastic drop in money supply. M2 China money, which comprises bank deposits and cash, contracted to 15% (Nov 2008) from 16% (Aug 2008).

    The Chinese government has taken many steps in the form of cutting interest rates repeatedly and thrusting a stimulus of US$586 billion (four trillion yuan) to cope with economic crunch and spur consumer spending. The main purpose is to increase the supply of money in the Chinese economy. In 2009, China’s growth target for money supply is 17%, up from 16% in 2008.

    In March 2009, lending increased to a record high of 1.89 trillion yuan ($277 billion), which is six times the lending seen in the previous year. According to the Central Bank, M2 money supply increased by 25.5% during the same period.


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