China is one of the most ancient cultural and commercial societies in the world. It has existed for thousands of years and has always played a major role in global economy. In modern days, under a Communist regime, territorial disputes, and the fact that it is the most populated country in the world – China is considered to be the second largest economy on the globe, second only to the Unites States.
Name and Origins of the Yuan Renminbi
The Yuan Renminbi is both the official currency of the People’s Republic of China, and it is also its primary unit. The literal meaning of Yuan Renminbi is, “People’s Currency.” One Yuan Renminbi is compiled out of 10 Jiao, and a single Jiao out of 10 Fen. The monetary authority responsible for issuing the Yuan Renminbi is the People’s Bank of China.
The most common abbreviation of the Yuan Renminbi is CNY, it is also possible to use CNH when it is traded in Hong Kong, and yet another popular form of abbreviation is RMB. The Chinese currency can be indicated by its symbol ¥, or CN¥, to distinguish it from currencies with a similar icon such as the Japanese Yen.
Chinese Commerce History
Chinese currency was already in place in both Ancient China and Imperial China. The Chinese culture has one of the world’s most rich trading history, and economic historians typically separate China’s history into three periods; the pre-imperial era, the early imperial era, and the late imperial are.
Of course, modern day transactions are much different. In 1914, the Silver Dollar was named the official currency of the Republic of China. Later on, during the 1930’s, copper and nickel coins were added to the calculation of the currency value. Next, during the mid-1930’s, a new currency known as Fabi was introduced to the Chinese economy.
Further on, in 1948, the Fabi was replaced by the Gold Yuan at the ridiculous rate of one Gold Yuan to three million Yuan Fabi. That same year, the original Yuan Renminbi was announced in an attempt to financially stabilize the Communist occupied territories of mainland China. Seven years later, the currency’s worth was reevaluated and the new Yuan Renminbi was issued at the rate of one new Yuan Renminbi to 10,000 old Yuan Renminbi. From the day the Yuan Renminbi was first issued in China, it went through an evolutionary process that reevaluated the currency’s worth many times.
Five Year Plan
First launched in 1953 by The Chinese Communist Party, the Five Year Plan is a series of social and economic growth initiatives aimed at shaping China’s economic development and gradually transforming it into a socialist market economy. At the end of each five year plan, the Chinese congress passes a new five year plan with guidelines for social and economic progress. Each plan maps out strategies for economic development, lays down growth goals, and launches new reforms.
Open Door Policy
In 1978, China issued its Open Door Policy in order to increase rates of foreign investments and thus encourage growth. The meaning of this policy is that China opened its economic borders for international trading. Even though the country’s economic borders had opened, the Yuan Renminbi was only used domestically, and foreigners had to use exchange certificates. This method led to dominant black market trading.
Later on, between 1997 and 2005, the Chinese government tied the Yuan Renminbi to the US Dollar, and only towards the end of that period a flexible exchange rate was issued. Later on, during 2009, local authorities featured a pilot program that allowed selected businesses to execute transactions in Hong Kong and a few designated nations. Since it initially launched, the program expended to all international business partners.
Present and Future
China has an outstanding economic growth pattern which led it to the position it holds in current days. It’s the second largest economy on the globe, and is considered to be the engine of local and global economic growth, having the rest of the world depend on its manufacturing capacity. Its gross domestic product is measured and tested each year in order to foresee the economic development for the rest of the world, which heavily relies upon it.