Renminbi

The renminbi (RMB, sign: ¥; code: CNY; also CN¥, 元 and CN元) is the official currency of China (People's Republic of China). Renminbi is legal tender in mainland China, but not in Hong Kong, Taiwan, or Macau. It is issued by the People's Bank of China, the monetary authority of China. Its name (simplified Chinese: 人民币; traditional Chinese: 人民幣; pinyin: rénmínbì) means "people's currency".

The primary unit of renminbi is the yuán (元). One yuan is subdivided into 10 jiǎo (角), which in turn is subdivided into 10 fēn (分). Renminbi banknotes are available in denominations from 1 jiao to 100 yuan (¥0.1–100) and coins have denominations from 1 fen to 1 yuan (¥0.01–1). Thus, some denominations exist in coins and banknotes. Coins under ¥0.1 are used infrequently.

Through most of its history, the value of the renminbi was pegged to the U.S. dollar. As China pursued its gradual transition from central planning to a market economy, and increased its participation in foreign trade, the renminbi was devalued to increase the competitiveness of Chinese industry. It had previously been claimed that the renminbi's official exchange rate was undervalued by as much as 37.5% against its purchasing power parity (see below). However, appreciation actions by the Chinese government, as well as quantitative easing measures taken by the Federal Reserve and other major central banks, have caused the renminbi to be within as little as 8% of its equilibrium value by the second half of 2012.

Since 2005, the renminbi exchange rate has been allowed to float in a narrow margin around a fixed base rate determined with reference to a basket of world currencies. The Chinese government has announced that it will gradually increase the flexibility of the exchange rate. China has initiated various pilot projects to "internationalize" the RMB in the hope that it will become a reserve currency over the long term.