Following the Chinese economy, the yuan is increasingly perceiving its significance in the world. Let's see what factors determine the global prospects for the currency of China.
The correct currency name
Yuan - the so-called Chinese money in the world. This name, however, does not quite correspond to the sound of the national currency in the PRC itself. In their homeland, Chinese banknotes are called nothing more than āJenminbiā (in translation - āpeople's moneyā). And yuan is just a noun, meaning money in principle. But the brevity and harmony of this Chinese word was to the taste of the rest, especially the Western world.
In ISO standards, the official currency designation is CNY. One yuan ("zhenminbi") is equal to one hundred fans (their name in China and in the rest of the world coincides). In turn, "pennies" can be combined into jiao - ten times the equivalent (such as "dimes" in the United States). So, the money of China is classified as follows: 1 yuan is equal to 10 jiao, which is identical to 10 fans. However, in practice, itās hard to find a āpennyā in Chinese stores, since they are removed from circulation. The most common are monetary coins in one or five jiao. Also in the "metal" there are single yuan.
Yuan history
The history of monetary circulation in China dates back several thousand years. Hieroglyphs, meaning the words āproductā, āpurchaseā, āsaleā, āexchangeā and associated with them in meaning, are in sources reflecting the times of ancient times. The first money in our usual sense appeared in the state in the 5th century BC. e. First, in the form of bronze ingots (or in the form of the simplest household items - shovels, knives), then Chinese coins appeared .
Money in the period corresponding to the European Middle Ages, along with copper samples were supplemented with an iron and lead format, and paper bills entered into circulation. Over time, Chinese money underwent "silver" standardization, and at the beginning of the twentieth century - "gold". When the Communists came to power, the Peopleās Bank of the PRC was created. All the money that the population had in circulation was subject to withdrawal and exchange for renminbi ā new Chinese money, the very āpeople's banknotesā. The issue of new currency became strictly controlled by the state.
Exchange rate policy
Until 1974, the RMB was traded, as a rule, with a reference to the pound sterling, but then quotes began to be applied to the US dollar. In 1994, the government of the country initiated the freezing of the renminbi to the American banknote in the ratio of 8.27 renminbi to 1 "buck", which lasted 11 years. This caused dissatisfaction among some trading partners of the PRC, including the United States. The Chinese authorities began to be pressured to liberalize their monetary policy, since, according to representatives of other countries, due to the low yuan exchange rate, China gained an advantage due to purchasing power. This state of affairs was partially confirmed by the figures: the negative trade balance of the USA with China in 2004 exceeded $ 160 billion, and in 2005 its increase continued. But in the same year, the PRC government canceled the āfreezingā of the course. True, as some experts note, from that moment the yuan was still not allowed to freely float, and its course could be artificially lowered.
RMB and ruble
Close economic cooperation between Russia and China every year impresses more and more. Chinese money, their name and pronunciation features are not new to the Russian Federation. Moscow and Beijing are organizing joint work in many global areas, so cooperation in the field of currency regulation plays an important role in trade cooperation between the two countries. Now the ruble and Chinese money are claiming a hypothetical inclusion in the list of reserve currencies, but so far this has not happened in practice.
In recent years, a trend has emerged - mutual settlements not in dollars or pounds, but in national banknotes. In 2010, the ruble began to be traded on the Shanghai Stock Exchange, and the yuan, in turn, on the MICEX and RTS platforms. National regulators have different tendering principles. The Central Bank of China has a strict limit on fluctuations in the RMB exchange rate on the exchange within 0.5%. The Bank of Russia, as a rule, affects trading using foreign exchange interventions. Among traders, the yuan is of growing interest, thematic portals appear where you can quickly transfer Chinese money to Russian at the current rate.
Promising investment in the RMB
Many experts believe that the renminbi is undervalued against world currencies, so it makes sense to invest in a Chinese banknote with the expectation that it will rise in price in the foreseeable future. As the practice of foreign exchange trading shows, the yuan, if it is growing, is not as fast as investors would like. For example, with regard to the ruble, experts say that recently, the Renminbi has shown an average annual growth of about 8%.
Around the same benefits can bring a regular bank deposit. Financiers recommend investing in RMB only in some cases. Firstly, it is advisable for regular trips to China. Secondly, the yuan can be regarded as a āreserveā currency for diversifying the investment portfolio. Thirdly, deposits in RMB on the terms of Russian banks may well be of interest to the Chinese themselves, who come to Russia for tourism or business.
Yuan and dollar
The relationship between the renminbi and the main world currency obviously depends on how things will develop in friendship between the countries issuing this money. One of the factors - China stores the bulk of its financial reserves in dollars. Much depends on whether the Chinese continue to hold foreign exchange reserves within the existing structure or prefer to diversify the portfolio. The head of the Central Bank of China voiced this idea at the official level - that the country's reserves cannot consist of only US dollars. The press has reported that China intends to sell about 2 trillion ābucksā out of the available 3.04 trillion in favor of transferring to other assets not related to the US āgreenā. Some experts believe that the Chinese authorities are just trying to negotiate favorable conditions for the yuan and turn Chinese money into a reserve currency on a par with the dollar.
Yuan as a world currency
The intentions of the PRC government to make the yuan one of the world's leading currencies, experts say, may have fundamental grounds. Some financial analysts expect that in the next few years, the share of China's foreign trade settlements with other countries in RMB may exceed 30%. The evolution of this figure is impressive: now it is close to 20%, while four years ago it was 3%.
In the first months of 2014, according to the calculations of financiers, Renminbi took the 7th place in the list of the most popular currencies in the world, overtaking, in particular, the Swiss franc. The renminbi's investment value is growing as China becomes more and more open to world markets. Recently, a joint project of the banks of England and the PRC appeared in London - a settlement center for organizing work with the yuan. Experts expect that Chinese money will become a notable currency at the global level, but it is not at all a fact that they will replace the dollar.
Yuan outside the PRC
The currency of China is beginning to be increasingly used in trading stocks, bonds and as other financial instruments. This direction will develop more intensively, the sooner the yuan can become a convertible currency. Renminbi is mastered in other countries of the āChineseā profile: Hong Kong (where the share of deposits in the currency of China reached 12%, while in 2008 it was only 1%), Taiwan, Singapore. The last two countries have offshore trading centers in RMB. Recently, the People's Bank of China and the Central Bank of Germany have concluded an agreement on settlements in the currency of China.
The political significance of the renminbi
The PRC is recognized by many experts as the main engine of the world economy. Now China is issuing, depending on the basis of calculation, 10-15% of the planetās GDP. The expansion of Chinaās economic influence, and hence the impact on political processes, directly depends on the governmentās monetary policy. Financiers believe that the prospects for this area depend on three factors.
- Firstly, it is internationalization - the use of currency as a tool for expressing value and conducting settlements in international financial transactions.
- Secondly, it is convertibility - the degree of restriction of capital flows and outflows.
- Thirdly, this is the use of foreign banks as a reserve currency.
The prospects of the renminbi as an instrument of political influence depend on how the Chinese government combines priorities in these areas.