Research on the RMB Issue
History
The Renminbi is the official currency in the mainland of People’s Republic of China (PRC), whose principal unit is the yuan. It is issued by the People’s Bank of China, the monetary authority of the PRC. The official ISO 4217 abbreviation is CNY, although also commonly abbreviated as "RMB". Its symbol is ¥.
The renminbi was first issued by the People’s Bank of China in December 1948, about a year before the People’s Republic of China was established. One of the first tasks of the new government was to end the hyperinflation that had plagued China near the end of the Kuomintang (KMT) era. A revaluation occurred in 1955 at the rate of 1 new yuan =10,000 old yuan.
During the era of the plan economy, the value of the RMB was set to unrealistic values in exchange with western currency and severe currency exchange rules were put in place. With the opening of the mainland Chinese economy in 1978, a dual track currency system was instituted, with renminbi usable only inside China and with foreigners forced to use foreign exchange certificates. The unrealistic levels at which exchange rates were pegged led to a strong black market in currency transactions.
In the late 1980s and early 1990s, the PRC worked to make the RMB more convertible. Through the use of swap centers, the exchange rate was brought to realistic levels and the dual track currency system was abolished.
The RMB is convertible on current accounts, but not capital accounts. The ultimate goal has been to make the RMB fully convertible. However, partly in response to the Asian financial crisis in 1998, the PRC has been concerned that the mainland Chinese financial system would not be able to handle the potential rapid cross border movements of hot mo ...