China Renminbi
By: Andris Nova Luna
&
Jeffrey Wong
1
Reminbi
• People’s Currency
¥ A variety of currencies circulated in China during the Republic of
China era, most of which were denominated in the unit "Yuan".
¥ The word yuan in Chinese literally means round, after the shape of
the coins.
¥ The Korean and Japanese currency units, won and yen respectively,
are cognates of the yuan and have the same Chinese character
¥ However, they do not share the same names for the subdivisions.
2
1969
The Chinese currency was
renamed the Renminbi,
divided into 10 Tsjao and
100 Fyng. The old name,
"Yuan", continued to be
use. (WCY 1984, p.171)
March 1 1955
Under a draconic
currency reform, 10,000
Jen Min Piao became
equal to one new Yuan
and a fixed Official Rate
against the U.S. Dollar
was established. (WCY
1984, p.171)
Yuan per $
2.267
Yuan per $
2.460
August 15 1971
With the floating of the
U.S. Dollar, the Renminbi
began to appreciate
against the American
unit. (WCY 1984, p.171)
December 23 1971
Following the devaluation of the U.S.
Dollar, Peking announced that the
Renminbi's exchange value against the
Hong Kong Dollar and Pound Sterling
would remain unchanged, and that all
trade transactions would be channeled
via these two units. With the
Renminbi's theoretical gold content
unaltered, a new Official rate resulted.
3
(WCY 1984, p.171)
February 20 1973
Following the devaluation of
the American Dollar, the
Official Rate was realigned.
Subsequently, the currency's
Effective Rate was realigned
periodically. (WCY 1984,
p.171)
January 1 1981
A multiple rate
structure for the
Renminbi was created
with the introduction of
a Foreign Trade Rate
divided into two
categories.
Yuan per $
2.040
December 15
1989
The Renminbi was
depreciated 21.2%.
(IMF 1990, p.97)
July 5 1986
The rate of
Renminbi against
U.S. remained
unchanged until
12-15-1989.
Yuan per $
3.720
Yuan per $
4.720
November 17 1990
The Renminbi was cut
9.6%. (WCY 19901993, p.416)
Yuan per $
5.220
4
January 31 1993
The Foreign
Exchange Swap
Rate was 7.50
December 31 1993
The Foreign Exchange
Swap Rate was 8.70.
Yuan per $
5.800
December 31
1994
Yuan per $
8.446
January 1 1994
The Effective
Exchange Rate and
the swap market rate
were unified at the
prevailing swap
market rate. (IMF
1995, p.114)
5
Exchange rate trends in terms of 5 year
6
7
Symbol
U.S.
Dollar
USDCNY
=X
1
Exchange
Rate
May 7
Key Indicators
6.9935
Data
Chinese
Yuan
Bid
Ask
6.9935
6.9935
6.9985
As of
Consumer Price Index (CPI)
8.70%
12/07
Gross Domestic Product (GDP)
11.20%
2007
Interest Rate Decision
7.47%
12/20/07
China's unemployment situation remained stable in the first half of this year with
the urban unemployment rate reported at 4.2 percent.
8
A few factors to consider when
evaluating the Chinese renminbi:
¥ Reasons to consider
¥ Since 2006, China has maintained the largest
current account surplus in the world—nearly
$180 billion.
¥ In 2004, China became the world's third
largest exporter, behind America and
Germany and is well positioned to become
the largest.
¥ For over 30 years, China's growth rate has
been the fastest of any large country in
history.
9
Highest point
of the inflation
rate: 1995
10
Risk factors to consider
¥ As an emerging market, China's economy and
the value of the Renminbi can be susceptible
to the fluctuation of global-risk aversion.
¥ The Chinese government struggles to sustain
adequate job growth for 100 to 150 million
surplus workers.
¥ China is challenged to contain environmental
damage and social strife related to the
Chinese economy’s rapid growth.
¥ The value of the Chinese RMB is fixed daily
by the Chinese Government vs. a basket of
the currencies of their major trading partners.
11
Short Term Forecast
¥ 2008 Beijing Olympics propelled
currency values
Soul Olympics 1988
12
Long Term Forecast
¥ China doesn’t have control over OPEC;
however, even if the Yuan stays fixed to
the dollar, OPEC might switch to the
Yuan.
¥ If this happens the U.S. dollar might get
too weak for even China to prop up,
and China might be forced to float their
currency.
13
Works sited
¥
http://www.iht.com/articles/2007/10/23/business/yuan.php
¥
http://research.stlouisfed.org/wp/1995/95-011.pdf
¥
http://intl.econ.cuhk.edu.hk/exchange_rate_regime/index.php?cid=8
¥
http://www.clevelandfed.org/research/trends/2008/0208/01intmar.cfm
¥
http://en.wikipedia.org/wiki/Renminbi
¥
http://www.Bloomberg.com
¥
http://www.Finance.yahoo.com
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