Key Highlights
- The official currency of the People’s Republic of China is the renminbi, while the yuan is its basic unit.
- China uses two currency codes: CNY for onshore trading within mainland China and CNH for offshore international markets.
- The People’s Bank of China controls the CNY exchange rate, while the CNH rate is market-driven.
- Despite different codes, the Chinese currency generally maintains a 1:1 exchange rate between CNY and CNH.
- Banknotes of the Chinese yuan feature iconic landscapes and historical sites from across the country.
Introduction
Have you ever wondered what to call the money used in China? With terms like renminbi, yuan, CNY, and CNH, it’s easy to get confused. Understanding the official currency of China is essential, whether you’re traveling, doing business, or simply curious about the world’s second-largest economy. This guide will walk you through everything you need to know about Chinese money, from its official name and different codes to its history and practical use in everyday life. Let’s clear up the confusion around the Chinese currency.
Understanding Chinese Currency: Renminbi and Yuan
When discussing the official currency of China, you’ll hear two names used frequently: renminbi and yuan. So, what’s the difference? The official name of the currency is Renminbi (RMB), which translates to “people’s currency.” It’s the formal term for the country’s monetary system.
On the other hand, the yuan is the basic unit of the renminbi. Think of it like the relationship between “sterling” and “pound” in the United Kingdom. While renminbi is the currency, the yuan is what you count and spend. In everyday conversation, many people use the Chinese yuan and renminbi interchangeably.
The Official Name and Meaning of Renminbi
The official name for China’s currency is renminbi. First issued by the People’s Bank of China in 1948, the name literally means “the people’s currency” in Mandarin. This name reflects the principles of the Chinese Communist Party, which established the People’s Republic of China. It was intended to signify a currency for the citizens, distinguishing it from previous monetary systems.
As the official currency, the Chinese renminbi is the sole legal tender throughout mainland China. All financial transactions, pricing, and accounting are conducted using this monetary system. The People’s Bank of China, the nation’s central bank, is responsible for issuing and regulating the renminbi to maintain financial stability.
While you might hear other terms, renminbi remains the formal and correct name for the overall currency system. Understanding this distinction is the first step to grasping the nuances of China’s financial landscape.
Yuan vs Renminbi: Key Differences Explained
The key differences between the Chinese yuan and Chinese renminbi can be a bit tricky, but a simple analogy helps. Renminbi (RMB) is the name of the entire currency system, while the yuan (¥) is its primary unit of account. It is similar to how “sterling” is the official name of the British currency, but people transact in “pounds.”
In everyday conversation, you’ll often hear people refer to their money as “yuan” or even use the colloquial term “kuai.” When you go to a shop in China, the price will be listed in yuan. This is the practical term used for counting and transactions. For instance, an item might cost 10 yuan, not 10 renminbi.
So, while renminbi is the formal name for the currency, the yuan is the basic unit you’ll encounter daily. Both terms are correct, but they serve different functions. Renminbi describes the system, and yuan quantifies the value.
Currency Codes: CNY, CNH, and Their Roles
Adding to the complexity of the currency of China are two different three-letter codes: CNY and CNH. While both refer to the Chinese renminbi, they are not interchangeable and serve distinct purposes in the global financial system. The official ISO code for the currency is CNY, which stands for the Chinese Yuan traded within mainland China.
In contrast, CNH is the code for the offshore version of the renminbi, traded outside of mainland China in markets like Hong Kong, Singapore, and New York. This dual-code system allows China to participate in international finance while maintaining control over its domestic economy. Let’s look at why this system exists and what separates these two versions.
Why China Uses CNY and CNH
The existence of both CNY and CNH is a result of China’s strategy to internationalize its currency gradually. Historically, China’s economy was relatively closed, and the government heavily restricted the flow of money in and out of the country. To manage this, the central bank created a system to separate domestic and international financial activities.
CNY represents the onshore yuan, which is tightly controlled by the People’s Bank of China. Its value is managed against a basket of currencies and is only allowed to fluctuate within a narrow band. This control helps prevent volatility and protects the domestic economy from external financial shocks.
Conversely, CNH was introduced to allow the renminbi to trade more freely on the international market. The CNH, or offshore yuan, is driven by supply and demand in the global foreign exchange market. This dual system enables China to promote the renminbi for international trade and investment while still safeguarding its internal financial stability.
Distinguishing Between Onshore and Offshore Yuan
The primary distinction between the onshore yuan (CNY) and offshore yuan (CNH) is where they are traded and who regulates them. CNY is used exclusively within mainland China for everyday transactions by residents and businesses. Its exchange rate is set daily by the People’s Bank of China.
The offshore yuan, CNH, is traded outside mainland China, with Hong Kong being the largest and most active market. It is used for international trade settlements and by foreign investors. Unlike CNY, the CNH exchange rate is determined by market forces, allowing it to fluctuate freely based on global supply and demand. This can sometimes lead to a difference in value between the two.
For businesses engaged in international trade with China, this distinction is crucial. Payments made to suppliers in mainland China are typically converted to CNY, while payments received from China might be in CNH. Understanding which currency you are dealing with can impact transaction costs and exchange rates.
History and Evolution of Chinese Money
The history of the modern Chinese currency is deeply connected to the country’s political evolution in the 20th century. Before the establishment of the People’s Republic, various currencies circulated in China. The current system was born out of the turmoil of the Chinese Civil War, which led to a complete overhaul of the nation’s financial landscape.
The People’s Bank of China introduced the renminbi in 1948, just before the end of the war. This move was designed to unify the currency and stabilize the economy under the new government. The origins and development of this new money marked a significant shift in China’s monetary policy.
Origins and Development of Renminbi
The Chinese renminbi was first issued on December 1, 1948, by the newly established People’s Bank of China. This occurred as the Chinese Communist Party was gaining control during the final stages of the civil war. The new currency was introduced to replace the various currencies circulating in the communist-controlled territories and eventually the currency of the Nationalist-led Republic of China.
With the founding of the People’s Republic of China in 1949, the renminbi was established as the sole legal tender across the country. The Chinese government implemented a series of monetary policies to unify the currency system and bring hyperinflation under control, which had plagued the old regime.
This move consolidated the new government’s economic authority and laid the foundation for a centrally planned economy. The renminbi’s introduction was a critical step in stabilizing the nation and creating a unified monetary system that remains in place today.
Major Currency Reforms and Milestones
Since its introduction, the renminbi has undergone several major currency reforms. One of the most significant was in 1955 when the People’s Bank of China issued a new currency to replace the old yuan. This second series of renminbi was introduced at a rate of 1 new yuan to 10,000 old yuan to combat inflation and re-stabilize the economy.
Another key milestone was the de-pegging of the renminbi from the U.S. dollar in 2005. The Chinese government moved to a managed floating exchange rate system, allowing the yuan’s value to be determined by a basket of currencies. This marked a major step toward making the renminbi more market-oriented.
Here are some key milestones in the renminbi’s history:
| Year | Milestone |
|---|---|
| 1948 | The People’s Bank of China first issues the renminbi. |
| 1955 | A second series of renminbi is introduced to replace the first. |
| 2005 | The renminbi is de-pegged from the U.S. dollar. |
| 2009 | A pilot program for cross-border trade settlement in renminbi begins. |
| 2016 | The renminbi is included in the IMF’s Special Drawing Rights (SDR) basket. |
Denominations and Designs of Chinese Money
Now that you know the names and history, what does Chinese money actually look like? The paper money comes in several denominations, each with unique designs and advanced security features to prevent counterfeiting. The current series of Chinese banknotes features the portrait of Chairman Mao Zedong on the front.
The reverse side of the banknotes is particularly interesting, as each one showcases a famous landmark or scenic view from across China. This turns the currency into a small gallery of the nation’s most beautiful sites. Let’s explore the common banknotes and coins you’ll encounter.
Common Banknotes and Coins in Circulation
The Chinese yuan renminbi is available in various denominations of both banknotes and coins, which the Chinese people use for daily transactions. The values are printed in both Chinese characters and Arabic numerals, making them easy to identify.
The most common denominations in circulation include:
- Banknotes: ¥1, ¥5, ¥10, ¥20, ¥50, and ¥100. There are also smaller notes for jiao (a tenth of a yuan), such as the 1 and 5 jiao notes, though they are less common now.
- Coins: ¥1, as well as 1 and 5 jiao coins.
The 100-yuan note is the largest denomination available, which can be surprising for visitors from countries with larger banknotes. This means you may need to carry a thicker stack of cash for significant purchases. However, the rise of mobile payments has reduced the reliance on physical cash in many parts of China.
How to Identify Genuine Chinese Currency
Unfortunately, counterfeit currency can be a problem in China, so it’s wise to know how to spot a fake. The People’s Bank of China has incorporated several security features into its Chinese banknotes to help you identify genuine money.
When you receive a banknote, especially a larger one like a ¥50 or ¥100, take a moment to check it. A real note should have a distinct, crisp sound when you snap it, while fakes often sound muffled. You should also feel for texture.
Here are a few key security features to look for:
- Rough Texture: Rub your thumb over Chairman Mao’s collar. On a genuine note, the ink should feel raised and slightly rough.
- Watermark: Hold the note up to the light. A clear image of Chairman Mao should appear on the left side.
- Security Line: A metallic security line is woven into the paper of genuine notes, not just printed on the surface.
- Color-Changing Ink: On the ¥100 note, the number “100” in the lower-left corner should change color from green to blue when you tilt the note.
Using and Exchanging Money in China
If you’re planning a trip to China, you’ll need to get some local currency. Foreign currencies like the U.S. dollar are generally not accepted for everyday purchases, so you’ll have to perform a currency exchange. Understanding the exchange rate and where to get the best deal is key to managing your travel budget effectively.
You can exchange major currencies at international airports, large banks, and some hotels. It’s a good idea to bring some cash for initial expenses, but you don’t need to carry large amounts with you. Let’s go over some useful tips for exchanging money and explore the different payment methods available in China today.
Tips for Currency Exchange and Rates
Getting a good exchange rate can save you money, so it’s worth being strategic about your currency exchange. The rates offered at airports are often less favorable than those at an international bank in a major city. Always keep your passport handy, as you’ll need it for any foreign exchange transaction.
When you’re ready to exchange money, remember that the renminbi’s value is managed by the Chinese government, unlike freely floating currencies. You can check the current exchange rate on official sites like the Bank of China’s website for a reliable benchmark.
Here are some tips to make the process smoother:
- Exchange money at official banks like the Bank of China for better rates.
- Keep your exchange receipts, as you might need them to convert your leftover yuan back to your home currency when you leave.
- ATMs are widely available in cities and accept many international cards, offering a convenient way to withdraw cash.
- Avoid exchanging money with individuals on the street, as this is risky and often involves counterfeit notes.
Payment Methods Beyond Cash: Mobile, Cards, and More
While cash is still useful, China has rapidly become a leader in electronic payment systems. In big cities, mobile payments are the most common way to pay for almost everything, from street food to subway tickets. Chinese companies like Tencent and Ant Group have revolutionized the payment landscape.
The two dominant mobile payment platforms are WeChat Pay and Alipay. For tourists, setting these up can be a bit challenging as they often require a Chinese bank account, but recent updates have made it easier for foreigners to link their international credit cards.
Beyond mobile payments, here are other options:
- Credit Cards: Major credit cards like Visa and MasterCard are accepted in larger hotels, high-end restaurants, and major shopping malls.
- ATMs: Widely available for cash withdrawals.
- Cash: Still necessary, especially in smaller towns and rural areas.
- Travelers’ Cheques: Can be cashed at major banks but are far less common today.
Conclusion
In summary, understanding Chinese currency, particularly the Renminbi and Yuan, is essential for both travelers and those interested in global finance. From grasping the distinctions between various currency codes to recognizing the evolution of Chinese money, becoming well-informed can make your experiences smoother, whether you are exchanging currency or using digital payment methods. The rich history and diverse denominations highlight the cultural significance of money in China. By arming yourself with knowledge, you can confidently navigate financial transactions and appreciate the unique aspects of Chinese currency. If you have any questions or need assistance, feel free to reach out for a free consultation!
Frequently Asked Questions
Can foreigners open a bank account and get Chinese money?
Yes, foreigners can open bank accounts in China, but it typically requires a valid residence permit and proof of address. Once you have an account with a major institution like the Bank of China, you can easily deposit funds, perform foreign exchange, and access Chinese money for your daily needs.
Are there tips for exchanging currency or using Chinese money?
For the best currency exchange rate, use official banks instead of airport kiosks. Always keep your exchange receipts. While major currencies are easy to exchange, carrying some Chinese money is essential for smaller purchases. In cities, consider using mobile payment apps, as they are widely accepted everywhere.
What is the most commonly used denomination in daily life?
In everyday conversation and transactions, the most commonly used banknotes are the 10, 20, and 50 Chinese yuan. These are practical for most daily purchases. While the 100-yuan note is common, smaller denominations are more convenient for things like transportation, snacks, and small market vendors.