China’s money is the renminbi (人民币, “people’s currency”), whose unit is the yuan (元), with ISO code CNY and the symbol ¥. One yuan divides into 10 jiao and 100 fen. The currency is issued by the People’s Bank of China (PBC), which first issued renminbi notes on 1 December 1948, ten months before the People’s Republic was founded. Since 21 July 2005 the yuan has followed a managed float against a basket of currencies rather than a fixed dollar peg, and it joined the IMF’s special drawing rights basket on 1 October 2016. Its sharpest modern inflation came in 1988 (18.8%) and 1994 (24.3%), and its central bank lacks formal independence, operating under the direction of the Communist Party.
From the fabi and the gold yuan to the 1955 revaluation
The renminbi was born out of a currency collapse. The Nationalist government’s fiat currency, the fabi, introduced when China left the silver standard in 1935, was printed in vast amounts to pay for the war against Japan and then the civil war. Fabi in circulation rose from 556.9 billion yuan at the end of the war against Japan to 604 trillion in August 1948. On 19 August 1948 the Nationalists replaced it with the gold yuan, at one gold yuan to 3 million fabi, and forced citizens to hand in gold, silver and foreign currency in exchange. The new notes lost value just as quickly, wiping out the savings of the urban middle class that had been the government’s firmest support.
Meanwhile the Communist side merged three regional banks, the Huabei Bank, the Beihai Bank in Shandong and the Xibei Farmers Bank, into the People’s Bank of China on 1 December 1948 at Shijiazhuang. It issued a single currency for the areas it controlled, called “renminbi” from June 1949, and moved its headquarters to Beijing that year. Ending the inherited hyperinflation was one of the new government’s first tasks. Once prices were stable, a revaluation on 1 March 1955 introduced a second series of notes at one new yuan for 10,000 old ones. The first-series notes, 62 designs in all, were withdrawn between 1 April and 10 May 1955.
Fixed at ¥2.46: the renminbi under central planning, 1949–1978
For most of its early life the yuan was pegged to the US dollar at ¥2.46. In a planned economy the rate mattered less as a price than as a tool. The state deliberately kept the yuan overvalued so that imported machinery for priority industries cost less in domestic money, part of a strategy of building heavy industry and reducing dependence on imported goods.
The banking system shrank to a single institution. Between 1955 and 1978 the People’s Bank was the only bank in the country, handling both central and commercial banking. During the Cultural Revolution it was demoted: in June 1969 its headquarters became a bureau of the Ministry of Finance with no more than 80 staff, and it only regained ministerial rank in March 1978. Through the 1970s the yuan was revalued until it reached ¥1.50 per dollar in 1980.
Swap centres, the FEC and a falling yuan, 1979–1994
Reform and opening up after 1978 reversed the logic. To make exports competitive, the yuan was devalued step by step from ¥1.50 per dollar in 1980 to ¥8.62 by 1994, its weakest on record. An “internal settlement rate” of ¥2.8 per dollar was introduced for trade, a devaluation of almost 100% from the official rate. From 1979 exporters could keep part of their foreign-currency earnings, from October 1980 they could sell surplus currency through the state exchange agency, and from the mid-1980s they could trade it at officially sanctioned swap centres in most large cities.
Foreign visitors lived in a separate monetary world. From 1980 to 1994 they paid with Foreign Exchange Certificates (FEC) issued by the Bank of China, nominally at par with the renminbi and used in hotels and Friendship Stores. Because FEC could buy imported goods that ordinary yuan could not, a black market grew outside tourist hotels, where touts offered more than ¥1.30 in renminbi for each ¥1 FEC. The banking system was split up at the same time. The Agricultural Bank of China and the Bank of China were separated from the PBC in March 1979, the State Council declared in September 1983 that the PBC would act only as a central bank, and in January 1984 its commercial business became the Industrial and Commercial Bank of China.
Inflation peaks of 1988–89 and 1994
Price reform brought the first of the yuan’s modern inflation peaks. Under the dual-track price system of the early reform years, some prices stayed fixed by the state while others were allowed to move with the market. When party leaders agreed at Beidaihe in 1988 to move fully to market prices, news of the plan set off bank runs, panic buying and hoarding, and the reform was rescinded in less than two weeks. Consumer prices rose 18.8% in 1988 and 18.0% in 1989, according to IMF data, and official indices showed Beijing’s consumer prices up 30% between 1987 and 1988. Salaried workers feared they could no longer afford staple goods, and discontent over inflation and corruption fed into the protests of spring 1989.
The second wave came after Deng Xiaoping’s 1992 southern tour restarted rapid growth. Inflation reached 14.6% in 1993 and 24.3% in 1994. Zhu Rongji, vice premier for the economy, also took over as governor of the PBC in 1993, and he is credited with bringing inflation down from 24.3% in 1994 to −0.8% in 1998. On 18 March 1995 the National People’s Congress confirmed the PBC’s status as the central bank in law, and in 1998 the old credit plan, a pillar of central planning, was abandoned, letting the bank run monetary policy in a modern sense.
The ¥8.27 peg and the 21 July 2005 reform
By 1994 the swap-centre reforms had brought the official rate above ¥8 per dollar, and the FEC was discontinued. The yuan became convertible for current-account transactions such as trade, though not for capital flows, and as the current account improved the government held it at about ¥8.27 per dollar from 1997 to 2005. As trade surpluses swelled, US officials pressed for years for a stronger yuan, and the IMF said in 2011 that it was undervalued by 23%.
On 21 July 2005 the peg was lifted, with an immediate revaluation to ¥8.11 per dollar. The yuan was then allowed to move within 0.3% of a daily central parity set by the PBC with reference to a basket led by the dollar, euro, yen and won. The band widened to 0.5% on 18 May 2007, 1% on 14 April 2012 and 2% on 17 March 2014. On 10 April 2008 a dollar bought less than ¥7 for the first time in over a decade, at ¥6.9920, but in July 2008, as the global financial crisis deepened, China effectively re-pegged to the dollar. On 19 June 2010 the PBC announced that it would again increase flexibility, and on 14 January 2014 the yuan reached its strongest level, ¥6.0395 per dollar.
11 August 2015, the SDR basket and the offshore CNH
On 11 August 2015 the PBC cut the yuan’s daily fixing by 1.9%, to ¥6.2298 per dollar, and by 1 September the rate stood at ¥6.38. After the Brexit vote, on 27 June 2016, the fixing fell to ¥6.6375, its weakest since December 2010. In 2015 the IMF had judged the yuan no longer undervalued, and on 30 November 2015 it voted to add the renminbi to the special drawing rights basket, alongside the dollar, euro, sterling and yen. Inclusion took effect on 1 October 2016 with a weight of 10.9%, making the yuan the first emerging-market currency in the basket.
The yuan still trades in two forms. CNY is the onshore currency, controlled by the PBC around its daily fixing. CNH is the offshore yuan used outside the mainland, where the market sets the rate more freely. Capital controls keep the two connected but separate: since January 2010 individuals have faced an annual foreign-exchange limit of US$50,000. Cross-border use has nonetheless grown, from a June 2009 pilot that let firms in Guangdong and Shanghai settle trade in yuan with partners in Hong Kong, Macau and parts of ASEAN, to the yuan becoming the world’s fifth-most-traded currency by April 2025.
Pan Gongsheng’s People’s Bank of China and the e-CNY
The PBC is one of the State Council’s ministerial-level departments. Its governor is nominated by the premier, approved by the National People’s Congress and appointed by the president, and it is directed by the Communist Party’s Central Financial Commission, led by Premier Li Qiang. Since 2023 Pan Gongsheng has held both the governorship and the post of the bank’s party secretary, which is the more powerful role. A 2023 restructuring abolished the nine regional branches created in 1998, restored provincial branches and moved consumer-protection and holding-company oversight to the new National Financial Regulatory Administration.
The bank has also built a digital version of the currency. It announced the digital renminbi, or e-CNY, in October 2019, and testing began in April 2020 in Shenzhen, Suzhou, Chengdu and Xiong’an. In 2021 Chengdu became the first city to accept it on every bus and metro line, and from May 2023 Changshu in Jiangsu began paying public employees’ salaries in e-CNY, a state payment rail running alongside Alipay and WeChat Pay. Physical money has kept changing as well: the fifth series of notes, introduced from 1999, puts Mao Zedong on every note, with landscapes on the back running from West Lake on the ¥1 through Mount Tai, the Three Gorges, Guilin and the Potala Palace to the Great Hall of the People on the ¥100. The fourth series was withdrawn on 1 May 2019.
The renminbi’s path from hyperinflation to the SDR basket runs alongside China’s wider growth story, told in our guide to the economy of China; the party control over the central bank is explained in our look at the government of China, and for a neighbouring currency that took a very different route, read about the currency of Japan.