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Chinese Currency - The Yuan, The Renminbi Or What?

RMB, CNY, CNH, ¥ - Confusion abounds on how to talk about the People’s Currency

by Frank Quin

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It’s getting more and more press, is the currency of the People’s Republic of China, as the country moves ever closer to centre stage in the global economy and its currency is promoted to ‘second-most-traded’ status, supplanting the euro. Yet how to describe that currency remains a mystery to much of the English-speaking world’s business and financial media.

It’s well enough recognised that the words ‘yuan’ and ‘renminbi’ are needed in one way or another, but the dilemma demonstrably lies in when and why to use the one or the other. As we’ll shortly see, some folk use both for good measure. And what about the symbols. Can we use ‘¥’? And is it RMB or CNY, or for that matter CNH?

Examples of Unregulated Usage

By way of illustrating the murkiness which abounds, consider these examples from a range of media –

We’ll start with this description on the website of currency converter xe.com –

The Chinese Yuan Renminbi is the currency of China.

Here we have terminology shared by the European Central Bank, which has a page dedicated to the ‘Chinese yuan renminbi (CNY)’. Note though the ECB’s use of the lower case.

And here, on 5 January this year, the Daily Telegraph takes a bob each way –

Any such move could greatly complicate the City of London’s plans to become the top market for global trading of the yuan or renminbi,

This notion that ‘yuan’ and ‘renminbi’ are interchangeable words is widespread in the financial media. Here’s Singapore’s Straits Times on 3 December last –

The market share of the yuan, also known as the renminbi (RMB), in traditional trade finance reached 8.66 per cent in October,

And Germany’s Der Spiegel back on 10 May 2011 –

In addition to the dollar and the euro, Belke believes that the Chinese yuan, also known as the renminbi, has the best chances of establishing itself as an international key currency, …

Notice that it’s the ‘Chinese yuan’ here, suggesting there may be others. And ‘yuan’ by itself is also not enough for the China Post, a leading Taiwanese daily, with this in a piece from 18 December last –

The Chinese yuan appreciated significantly against the greenback this year …

Very possibly that other yuan is in Taiwan itself, given that- as we’ll see below - ‘yuan’ effectively means ‘dollar’, the English name for the Taiwanese currency.

Evidence of interchangeability between ‘yuan’ and ‘renminbi’ when referring to specific amounts of the Chinese currency is also readily found on the financial pages. Here’s the New York Times from 6 March last year –

… data from the People’s Bank of China showed the central bank and commercial banks in China had bought a record 683.7 billion renminbi, the equivalent of $109.9 billion, worth of foreign exchange in January.

Likewise in the Sydney Morning Herald of 19 April 2012 –

The 2 billion renminbi senior unsecured bond was priced with a yield of 3 per cent …

But if it’s yuan you want, see this from Reuters on 6 January this year –

The Export-Import Bank of China (Chexim) plans to issue up to 4 billion yuan ($660.99 million) of dim sum bonds in Hong Kong to institutional investors,

Making a Stand

Uncomfortably perched as we are on the horns of this particular dilemma, here at iNVEZZ.com we’ve decided to take a stand, backed by exhaustive (!) research, and albeit we don’t have a China hand amongst us.

There’ve been several commentaries on what to call the Chinese currency over the past few years, most somewhat tongue in cheek and some with more than a whiff of condescension. That’s an attribute also evident in the description of Chinese currency debt instruments as ‘dim sum’ bonds – as witness the Reuters extract above – which is somewhat akin to describing US dollar bonds as ‘apple pie’ paper or perhaps sterling gilts as ‘rosbif’ bonds.

No commentary that we’ve come across really nails down the issue though, so here follows iNVEZZ.com’s own take on matters.

 The words ‘yuan’ and ‘renminbi’ are only interchangeable when referring to China’s currency in a generic or abstract way. Thus, we can say either that ‘the yuan has appreciated 10 percent against the dollar’ or that the renminbi has done so.

 ‘Renminbi’ cannot however be used as a unit of account, ie, we can’t talk of X number of renminbi, as the NY Times and Sydney Morning Herald erroneously do in the above extracts. This is because ‘renminbi’ literally translates into English as ‘people’s currency’ and is conceptual rather than concrete.

 Specific amounts of the currency must be described as ‘yuan’ – there appears to be no plural form of the word yet in circulation – and if the word is used as opposed to its symbol (as to which, see below) it follows the amount, as in the Reuters item above.

 The word ‘yuan’, though literally meaning ‘round piece’, effectively translates into English as ‘dollar’, but not so much the modern version as the dollars of Spanish origin – and primarily the ‘pieces of eight’ of piracy parlance – which by common consent became the trade currency in 19th Century China.

 Etymologically speaking, there is a close association between the Chinese yuan, the Japanese yen and the Korean won, with them each sharing the Chinese character for the respective words until 20th Century language reform in the latter two countries.

 Though their depiction in the respective languages is now different, the monetary symbol for the yuan and the yen remains the same, namely ¥, though of course the symbol is much more associated with the Japanese currency. The Korean won incidentally – both North and South variants – uses the symbol ₩.

 In terms of the three-letter currency code system, that ordained for the yuan by the ISO – the International Organisation for Standardisation – is CNY, derived from the two-letter country code for China (CN) and the letter ‘Y’ for yuan. So we can write amounts of yuan preceded by CNY.

 That being the case, it’s not helpful that there is another commonly-used three letter code for the yuan, which is ‘RMB’ and which of course derives from ‘renminbi’. It’s especially unhelpful that RMB is used by the People’s Bank of China in its official translation into English of its published reports and briefings, albeit to refer to the currency in general terms and not for specific amounts. The PBoC routinely writes the amount followed by the word ‘yuan’. Unlike the Shanghai Stock Exchange though, which uses ‘RMB’ instead of ‘CNY’ before stated amounts of the currency.

 We can’t leave this overview without mentioning yet another three-letter code for the Chinese currency, namely ‘CNH’. This is not ISO-recognized but is in widespread use for yuan-denominated bonds issued outside of mainland China and thus – largely – free of the exchange rate and yield controls imposed by the People’s Bank of China. The trade started in 2004 in Hong Kong, part of China but a semi-autonomous ‘special administrative region’ until 2047 and hence the identifier ‘H’ in the code.

How We’re Doing It Here at iNVEZZ.com

Given the foregoing, here at iNVEZZ.com we’re going to use ‘yuan’ and ‘renminbi’ interchangeably when describing or referring to the Chinese currency in a generic or general way, as in, eg, ‘The yuan has firmed 0.3 percent against the US dollar in today’s Asian trading’, or ‘Trading in the renminbi has been unusually muted today’.

When it comes to specific amounts though, we’re going to put ‘CNY’ ahead of the amount, as in, eg, ‘The CNY3.5 billion bond issue is a first for the third-ranked Shenzhen Stock Exchange ‘. We are not going to use ‘RMB’ for this or indeed any other purpose and we’re confident that the People’s Bank of China – and the Shanghai Stock Exchange for that matter - will soon come around to our way of thinking. We’ll reserve ‘CNH’ for writing specifically about an ‘offshore’ yuan bond issue.

Also, our feeling is that the ¥ symbol should be the sole preserve of the yen, its primary home these many years. Though, this is a stance which may need revision as the yuan starts to dominate the financial news, which it seems hell-bent on doing.

And, while we might on occasion write a specific amount followed by the word ‘yuan’ (a la the PBoC and various media), our take is that if we don’t write, eg, ‘1,500,000 dollars’, which we don’t, we shouldn’t write ‘1,500,000 yuan’.

So that’s it, in a rather large nutshell. All you ever wanted or needed to know on how to refer to the Chinese currency. And then some. But we’re open to other points of view, for which a comments box is conveniently located below.

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