ChinaRenminbi By: Andris Nova Luna & Jeffrey Wong
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.
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) 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. (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
Yuan per $ 2.040 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) Yuan per $ 4.720 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. November 17 1990 The Renminbi was cut 9.6%. (WCY 1990-1993, p.416) 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 $ 5.220 Yuan per $ 3.720
January 31 1993 The Foreign Exchange Swap Rate was 7.50 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) December 31 1993 The Foreign Exchange Swap Rate was 8.70. Yuan per $ 5.800
China's unemployment situation remained stable in the first half of this year with the urban unemployment rate reported at 4.2 percent.
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.
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.
Short Term Forecast • 2008 Beijing Olympics propelled currency values Soul Olympics 1988
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.
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