What is Renminbi (RMB)? - Definition & History

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

After reading this lesson, you'll now what the Renminbi is, where it is used, and how it has changed over the years. You'll see it go from a currency that the international world disregarded to one that can now compete.

Definition

The renminbi is the official name for the currency of China. When you go visit China, you will need to use renminbi currency to go shopping. If you talk to Chinese people, you will also hear them refer to the currency as yuan. Both renminbi and yuan are interchangeable in conversation but renminbi is the official name. Renminbi literally means the people's currency. Another local name for the currency is kuai just like we have the local name of buck for the US dollar.

The Renminbi
The Renminbi

Beginnings

The renminbi was created towards the end of 1948 by the People's Bank of China. The renminbi was created as a means to unify China as there were several types of currencies being used across China. By creating an official currency, it allowed the Communist Party to gain better control of the whole mainland.

Units

Just like American currency has different units such as the dollar, dime, nickel, etc., so does renminbi. The renminbi units are the yuan, the jiao or mao, and then the fen. There are 10 jiao in 1 yuan and 100 fen in 1 yuan kind of like the dime and penny in US currency. There is a difference between the name renminbi and the name US dollar. In the US, we also use the term dollar to denote the dollar unit. In renminbi currency, there is no renminbi unit, so you would never say anything costs you 10 renminbi. Instead, you always say the unit of cost. So 10 yuan or 5 jiao or mao. In local terms, mao is used more often than jiao.

Changes

The renminbi has undergone some changes since its beginning in 1948. After the Communist Party took over mainland China, they had to work out a solution to control the inflation that had been undermining China's economy. So, in 1955, a new renminbi was issued. This new renminbi yuan equaled 10,000 of the old yuan. This helped to stabilize the economy and get China moving forward.

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