Chinese Yuan Renminbi History

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Early Currency in China

With a history of over 3000 years, Chinese currency existed in both Ancient and Imperial China. In 1914, the Silver Dollar was established as the official currency of the Republic of China, with copper, fen, and nickel coins being added in the 1930s. During this time silver appreciated in value, and China could no longer retain the silver standard. In 1935, a new currency known as Fǎbì, was issued.

Introduction of the Gold Yuan and Chinese Yuan Renminbi

The Gold Yuan replaced the Fǎbì in 1948 at a rate of 1 Gold Yuan to 3 million Yuan Fǎbì. That same year, the Yuan Renminbi (often called RMB) was introduced as a way to help stabilize the Communist held areas of mainland China. In 1955, a re-evaluation took place and a new Yuan Renminbi was introduced at a rate of 1 new Yuan to 10,000 old Yuan.

The Renminbi in Foreign Exchange

During the command economy, the Chinese Yuan Renminbi was set to unrealistic exchange values and as a result, severe currency guidelines were put in place. When China's economy opened in 1978, the Yuan Renminbi was only used domestically and foreigners used exchange certificates; this led to a powerful black market. From 1997 to 2005, the Chinese government pegged the Chinese Yuan Renminbi to the US Dollar at approximately 8.3 CNY to 1 USD. In 2005, a flexible mechanism of exchange rates was phased in, with the RMB being re-evaluated to 8.1 Renminbi per US dollar. The Chinese government launched a pilot program in 2009, allowing some businesses in Guangdong and Shanghai to execute business and trade transactions with counterparties in Hong Kong, Macau, and select nations. The program has since expanded to all areas of China and all international counterparties. China has also made agreements with Australia, Japan, Thailand, Russia, and Vietnam to allow for direct currency trade, instead of converting to the US Dollar. As a managed float, the Renminbi's value is determined by a basket of foreign currencies.

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