Chinese Yuan (CNY)

The Chinese yuan (ISO 4217 code CNY, symbol ¥ or 元) is the basic unit of the renminbi (RMB), the official currency of the People's Republic of China. The renminbi is issued by the People's Bank of China (PBoC) and is legal tender in mainland China; Hong Kong and Macau keep their own currencies. "Renminbi" (人民币) means "the people's currency" and names the monetary system, while "yuan" (元) is the unit in which prices are counted, much as "sterling" is the system and "pound" the unit in the United Kingdom. In everyday speech the yuan is often called kuai.

One yuan is divided into 10 jiao (colloquially mao), and one jiao into 10 fen. The code CNY refers to the currency traded inside mainland China; the same currency traded outside the mainland, chiefly in Hong Kong, is quoted under the market code CNH. Both are the same legal currency, but they trade in separate markets at slightly different rates.

The terms renminbi, RMB, yuan and CNY are often used as if they meant the same thing. Strictly, RMB is the currency, the yuan is its unit of account, and CNY is the code used on foreign exchange platforms and in payment messages. A price tag in China reads "¥100" or "100元"; a bank confirmation for a cross-border payment shows "CNY 100.00".

The ¥ sign is shared with the Japanese yen, so context, or the code, is needed to tell the two apart. Inside China the character 元 is the more common written form. The ISO numeric code for the yuan is 156.

The offshore code CNH is not an ISO code. It was adopted by banks and trading platforms after an offshore market developed in Hong Kong in 2010, so that onshore and offshore prices could be shown side by side. Pages on onshore RMB and offshore RMB describe the two markets, and CNH covers the offshore rate itself.

The People's Bank of China was founded on 1 December 1948 in Shijiazhuang, in the area then held by the Communist forces, and issued the first series of renminbi the same day. The new money replaced the many regional and wartime currencies in circulation, including the Nationalist government's gold yuan, which had collapsed in hyperinflation. When the People's Republic was proclaimed in October 1949, the renminbi became the national currency.

Because the first series had lost much of its value, a second series was issued in March 1955 at a rate of 10,000 old yuan to 1 new yuan. Through the planned-economy decades the exchange rate was set administratively and the currency played almost no role abroad. From 1980 to 1994 foreign visitors had to use Foreign Exchange Certificates rather than ordinary renminbi, which created a two-tier system and a black market between the two.

On 1 January 1994 the official rate and the market "swap" rate were unified at about 8.7 yuan per US dollar, a large devaluation from the official rate. From 1997 the yuan was held at about 8.28 per dollar, an effective peg that lasted until 21 July 2005, when the PBoC revalued the currency by 2.1 percent and said it would manage it against a basket of currencies. The yuan was held steady again at about 6.83 per dollar during the 2008 financial crisis and allowed to move again from June 2010.

The yuan is a managed floating currency. Each business morning at 9:15 Beijing time the China Foreign Exchange Trade System, which operates under the PBoC, publishes a central parity rate, known as the daily fixing, against the US dollar and other currencies. Onshore trading in the dollar–yuan pair may then move no more than 2 percent either side of that fixing. The band was 0.3 percent in 2005 and was widened in steps in 2007, 2012 and 2014.

On 11 August 2015 the PBoC changed the way the fixing was set so that it would follow the previous day's closing rate more closely. The yuan fell by almost 2 percent that day and about 3 percent over three days, a devaluation that unsettled world markets and was followed by heavy capital outflows. In 2017 a "counter-cyclical factor" was added to the fixing formula, giving the central bank more room to lean against market moves. Trading partners have at times accused China of holding the yuan down to help exporters, while Chinese officials describe the policy as keeping the rate "basically stable at a reasonable and balanced level".

The offshore CNH rate is not bound by the onshore band, so the two prices can drift apart, especially when markets are under stress. The difference is tracked as the CNY-CNH spread and is watched as a gauge of pressure on the currency.

The yuan has been convertible for current-account transactions, such as paying for imported goods and services, since December 1996. Capital-account movements, such as buying foreign shares or moving savings abroad, remain subject to capital controls. Individuals have an annual allowance of USD 50,000 in foreign exchange purchases, and larger or investment-related flows need approval or must go through designated channels. These rules are administered by the State Administration of Foreign Exchange (SAFE).

Over time China has opened controlled routes for foreign investors instead of lifting the controls outright. These include quota schemes for qualified foreign institutional investors, the Stock Connect links between the Shanghai, Shenzhen and Hong Kong exchanges, and Bond Connect for the interbank bond market. The partial nature of convertibility is the main reason the renminbi's role abroad is still small compared with the size of China's economy.

China began promoting the renminbi for trade settlement in 2009. Since then, banks in Hong Kong, Singapore, London, Frankfurt and other centres have been appointed as RMB clearing banks. The PBoC has signed bilateral swap lines with dozens of central banks, and in 2015 it launched the Cross-Border Interbank Payment System (CIPS) to clear and settle renminbi payments across borders. The way these pieces fit together is covered in cross-border RMB settlement. Offshore, companies and governments issue renminbi bonds, known as "dim sum" bonds when issued in Hong Kong. Foreign issuers selling renminbi bonds in mainland China issue "panda" bonds.

In November 2015 the International Monetary Fund decided to add the renminbi to the basket that values its Special Drawing Rights, with effect from 1 October 2016. It joined the US dollar, euro, yen and pound sterling. Its weight was set at 10.92 percent and raised to 12.28 percent in the 2022 review. The renminbi now counts as a reserve currency, but its share of the world's reported foreign exchange reserves has stayed at roughly 2 to 3 percent, far behind the US dollar and the euro. It ranks among the most-used currencies in international payment messages and in trade finance. It is used most in trade with Russia, with commodity exporters, and with countries that take Chinese loans for infrastructure.

The renminbi now in use belongs mainly to the fifth series, first issued in 1999 and updated several times since, most recently in 2019 and 2020. Banknotes are issued in denominations of 1, 5, 10, 20, 50 and 100 yuan; all carry a portrait of Mao Zedong on the front. Coins are issued in 1 jiao, 5 jiao and 1 yuan. Fen coins and small jiao notes from earlier series remain legal tender but are rarely seen.

Cash use has fallen sharply in China because most everyday payments are made by mobile wallets, chiefly Alipay and WeChat Pay. The PBoC requires shops to keep accepting cash, and has been developing a digital form of the currency. The e-CNY is a retail central bank digital currency that has been piloted since 2020. It is a liability of the central bank in the same way as banknotes, and is distributed through commercial banks. It is meant to sit alongside cash, not replace it.

• People's Bank of China
• State Administration of Foreign Exchange
• China Foreign Exchange Trade System
• IMF: Special Drawing Rights