As the world’s largest manufacturing and exporting economy China is growing exponentially. Of course, currencies are closely linked to economic performance and have changed over the years. One aspect that seems to be evolving is the name. which changes according to its purpose Naming currency in china different ways So much can be confusing. And this article aims to make this point clear.
Yuan, which means “People’s Currency” in Mandarin It is the official currency of the People’s Republic of China. Often abbreviated as RMB, the official ISO code is CNY (for Chinese Yuan). The term Yuan refers to the base unit of currency. The same is true of the British currency, the pound sterling, where ‘pound’ actually refers to a unit of currency.
The special thing about the Yuan is that it is divided into two types of currencies that are exchanged at different rates. As a result, a second unofficial code was used to distinguish them: CNH (H stands for Hong Kong which is the first offshore market for the yuan)
What are the differences between the two types of yuan?
Although both types of yuan have the same value in China, However, it has a different exchange rate compared to other currencies. CNY refers to the Yuan that is traded in mainland China mainly for domestic transactions. and is often referred to as the onshore Yuan. CNH, on the other hand, is called the offshore Yuan and is freely traded on world markets outside of China. It is less controlled and fluctuates with supply and demand. It was jointly launched in 2010 by the People’s Bank of China (PBOC) and the Hong Kong Monetary Authority (HKMA) to facilitate and expand the use of the currency. and supports China’s efforts to internationalize its currency. In this regard, China and Taiwan also agreed on an offshore yuan to be traded on the island: CNT
Chinese currency over time
For most of early history The yuan is pegged to the US dollar, however, under increasing pressure from the country’s trading partners. The Chinese government decided to abandon the fixed exchange rate system in 2005. The currency currently operates under a managed system of floating exchange rates. in other words The People’s Bank of China (PBoC) maintains tight control over its currency. The yuan is tied to a basket of currencies that reflects the country’s trading partners. And the value of the money is kept within a range of 2% against the US dollar. China’s two main allies are the United States and the European Union. The weights of the currencies in the basket are around 19.88% and 18.45% respectively, although economists suggest the yuan is undervalued. But the undervaluation of the currency makes the country more competitive with its exports.
Do you know?
Chinese people do not use the words yuan or yuan when referring to their currency. Instead, they use the word ‘kuai’, which means ‘piece’.
Chinese digital currency (e-CNY)
A particularly interesting development to watch is the rise of China’s digital currency, e-renminbi, which will allow international payments to deliberately bypass the US dollar. Electronic yuan currency is being trialled in several Chinese cities. and is the first digital currency issued by a major economy. Intended to alleviate some of the pressure from the dollar-dominated IMS, China’s CBDC (central bank digital currency) supports the country’s efforts to wean itself off its reliance on the US dollar and Western-led payment systems. Although unlikely to change the status quo. But it can certainly consolidate China’s economic and financial influence in the medium term if it proves successful.