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China Currency System
The renminbi(“people's currency”) is the currency of China, denominated as the yuan, subdivided into 10 jiao or 100 fen. The renminbi is issued by the People's Bank of China, the monetary authority of the PRC. The ISO 4217 abbreviation is CNY, although also commonly abbreviated as "RMB". The Latinised symbol is ¥ . The yuan is generally considered by outside observers to be undervalued by about 30%.
The renminbi is held in a floating exchange-rate system managed primarily against the US dollar. On July 21 China revalued its currency by 2.1% against the US dollar and, since then has moved to an exchange rate system that references a basket of currencies and has allowed the renminbi to fluctuate at a daily rate of up to half a percent.
The rate of exchange (Chinese yuan per US$1) on July 31, 2008 was RMB 6.846, in mid-2007 was RMB 7.45, while in early 2006 was RMB 8.07:US $1 = 8.2793 yuan (January 2000), 8.2783 (1999), 8.2790 (1998), 8.2898 (1997), 8.3142 (1996), 8.3514 (1995).
Beginning January 1, 1994, the People's Bank of China quotes the midpoint rate against the Us dollar based on the previous day's prevailing rate in the interbank foreign exchange market.
There is a complex relationship between China's balance of trade, inflations, measured by the consumer price indes and the value of its currency. Despite allowing the value of the yuan to "float", China's central bank has decisive ability to control its value with relationship to other currencies. Inflation in 2007, reflecting sharply rising prices for meat and fuel, is probably related to the worldwide rise in commodities used as animal feed or as fuel. Thus rapid rises in the value of the yuan permitted in December, 2007 are possibly related to efforts to mitigate inflation by permitting the renminbi to be worth more.
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