Facts About China's Currency - New York Times
Facts About China's Currency - New York Times
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July 21, 2005
Facts About China's Currency
By REUTERS
BEIJING, July 21 (Reuters) - China bowed to months of market and political pressure on Thursday by revaluing the yuan by 2.1 percent and abandoning the currency's decade-old peg against the dollar.
In a long-awaited move that it said would improve the running of the economy and give more play to market forces, the central bank said the yuan's value from now on would be linked to a basket of currencies of China's main trading partners.
Beijing had been under strong pressure from its trading partners, especially the United States, to abandon the yuan's peg of 8.28 per dollar, which they said undervalued the currency and handed Chinese exporters an unfair advantage on world markets.
The new rate, initially, will be 8.11 yuan per dollar, well short of the 10 percent revaluation that Washington had been seeking to head off protectionist pressure in Congress.
Following are key facts of the yuan
Name of the currency:
The yuan, which is known as the "renminbi," or RMB, literally means "the People's money" in Chinese.
The yuan is the denominal unit of the Chinese currency. There are coins as little as one Chinese cent, or "fen," to 100 yuan note graced by the portrait of the late Chairman Mao Zedong.
Currency regime:
Until 1994, China had an artificially high official exchange rate under the planned economy imposted by the Communist Party after it came to power in 1949.
Between 1994 and 1996, the yuan appreciated under a "managed float" currency regime from 8.7 to the dollar to around 8.28.
The yuan was boxed between 8.2770 and 8.2800 for about three years between 1997 and 1999 as Beijing managed to keep the yuan stable during the Asian financial crisis.
The yuan was allowed to close slightly outside the firm end of the 30-basis point band in April 2000 and was later widened by another 10 points to 8.2760 to 8.2800 against the dollar, which the central bank maintained until now through intervention.
Convertibility:
The yuan is convertible on the current account, which covers trade and services, but it's still restricted on the capital account, which covers investment and borrowing.
The government has relaxed some capital controls in recent years, such as allowing foreign investors to buy yuan-denominated A-shares on the domestic market through the QFII scheme and letting domestic companies invest more overseas.
Circulation:
In addition to the mainland China, the yuan is used in Hong Kong, Macau, which local banks have been allowed to handle personal yuan business. The yuan is gaining regional clout in recent years as many of China's neighbouring countries have used the currency for border trade.
Global status:
China's fast economic growth and rapid economic transformation in the past 25 years have boosted the status of the yuan on the world stage, despite its limited convertibility.
China won wide praises for keeping the yuan stable during the Asian financial crisis despite pressure to devalue. The yuan is now at the centre of world economic debates and speculation.
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July 21, 2005
Facts About China's Currency
By REUTERS
BEIJING, July 21 (Reuters) - China bowed to months of market and political pressure on Thursday by revaluing the yuan by 2.1 percent and abandoning the currency's decade-old peg against the dollar.
In a long-awaited move that it said would improve the running of the economy and give more play to market forces, the central bank said the yuan's value from now on would be linked to a basket of currencies of China's main trading partners.
Beijing had been under strong pressure from its trading partners, especially the United States, to abandon the yuan's peg of 8.28 per dollar, which they said undervalued the currency and handed Chinese exporters an unfair advantage on world markets.
The new rate, initially, will be 8.11 yuan per dollar, well short of the 10 percent revaluation that Washington had been seeking to head off protectionist pressure in Congress.
Following are key facts of the yuan
Name of the currency:
The yuan, which is known as the "renminbi," or RMB, literally means "the People's money" in Chinese.
The yuan is the denominal unit of the Chinese currency. There are coins as little as one Chinese cent, or "fen," to 100 yuan note graced by the portrait of the late Chairman Mao Zedong.
Currency regime:
Until 1994, China had an artificially high official exchange rate under the planned economy imposted by the Communist Party after it came to power in 1949.
Between 1994 and 1996, the yuan appreciated under a "managed float" currency regime from 8.7 to the dollar to around 8.28.
The yuan was boxed between 8.2770 and 8.2800 for about three years between 1997 and 1999 as Beijing managed to keep the yuan stable during the Asian financial crisis.
The yuan was allowed to close slightly outside the firm end of the 30-basis point band in April 2000 and was later widened by another 10 points to 8.2760 to 8.2800 against the dollar, which the central bank maintained until now through intervention.
Convertibility:
The yuan is convertible on the current account, which covers trade and services, but it's still restricted on the capital account, which covers investment and borrowing.
The government has relaxed some capital controls in recent years, such as allowing foreign investors to buy yuan-denominated A-shares on the domestic market through the QFII scheme and letting domestic companies invest more overseas.
Circulation:
In addition to the mainland China, the yuan is used in Hong Kong, Macau, which local banks have been allowed to handle personal yuan business. The yuan is gaining regional clout in recent years as many of China's neighbouring countries have used the currency for border trade.
Global status:
China's fast economic growth and rapid economic transformation in the past 25 years have boosted the status of the yuan on the world stage, despite its limited convertibility.
China won wide praises for keeping the yuan stable during the Asian financial crisis despite pressure to devalue. The yuan is now at the centre of world economic debates and speculation.
Copyright 2005 Reuters Ltd. Home Privacy Policy Search Corrections XML Help Contact Us Work for Us Back to Top
posted by Eastlaw at Friday, July 22, 2005
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