Course history

The Chinese yuan, or CNY or RMB, is a unique currency, mainly due to the long history of Chinese civilization, the roots of which date back many centuries. The modern form of the yuan evolved in the 19th century, and the issuance of coins began in 1889. From the very beginning, the yuan has been divided in decimal.

Initially, the issue of cash was mainly handled by private banks, but it was not until 1903 that the imperial government joined the issue process. After the overthrow of the last emperor of the Qing Dynasty and the fall of the empire, the era of the republic began, which was characterized by considerable instability, the dictatorship of Yuan Shikai, and political conflicts, including battles with Japan.

In an attempt to regulate the situation, the Central Bank of the Republic of China began issuing the yuan. Unfortunately, the war with Japan in 1937-1945 made the situation even worse, leading to the simultaneous circulation of two currencies: the Chinese yuan and the Japanese currency issued by the Japanese.

After the end of the war and the communist takeover, the yuan became the official currency, but problems with counterfeiting and high inflation forced a monetary reform in 1995. This involved the exchange of banknotes. At that time, China's exchange rate policy was based on maintaining a high exchange rate of the yuan against other currencies.

Since 2005, the Chinese authorities have been tightly controlling the yuan exchange rate and trying to regulate the flow of capital, abandoning the previous policy of devaluation, which we discuss on our training platform.

Top currency pairs

The Chinese yuan appears to be quite an important currency on the international currency market. At the beginning of the 20th century, it was ranked 35th in terms of share in the forex market, according to the Bank for International Settlements. With an account with one of the recommended forex brokers, you can trade yuan in the following pairs, for example:

• USD/CNY (US Dollar to Chinese Yuan) - this is one of the most important currency pairs in the world because it reflects the relationship between the two largest economies — the US and China;
• EUR/CNY (Ruro to Chinese Yuan) - this pair reflects the value of the Chinese Yuan against the euro, which is the official currency of many countries of the European Union;
• GBP/CNY (Pound Sterling to Chinese Yuan) - this pair reflects the relationship between the British Pound and the Chinese Yuan, being relevant especially for trade between the UK and China;
• AUD/CNY (Australian Dollar to Chinese Yuan): This pair reflects the relationship between the Australian dollar and the Chinese yuan, due to the significant trade relationship between Australia and China;
• JPY/CNY (Japanese Yen to Chinese Yuan) - this pair reflects the value of the Chinese Yuan against the Japanese Yen, being important in trade relations between Japan and China;
• CAD/CNY (Canadian Dollar to Chinese Yuan) - This pair reflects the relationship between the Canadian dollar and the Chinese yuan, being relevant to trade between Canada and China.

Course Factors

A key issue that affects the Chinese yuan exchange rate is the decisions made by the People's Bank of China (PBOC) regarding interest rates, reserve requirements for banks and other monetary policy tools that can affect the value of the yuan on the international market. The health of the Chinese economy, including economic growth, inflation, employment and industrial production indicators, are also not insignificant. A strong economy can support the strengthening of the currency, while weak indicators can lead to a weakening of the yuan.

The value of the Chinese currency is also significantly affected by the decisions of the Chinese authorities regarding the control of capital flows, intervention in the foreign exchange market and management of the yuan exchange rate, which have a significant impact on its value.

Unfortunately, trade disputes between China and other countries, especially with the United States, can affect the value of the yuan through changes in expectations for future trade and investment.

It is worth mentioning that investors' expectations about the future movements of the yuan exchange rate, as well as the actions of speculators in the currency market, can lead to short-term changes in the value of this currency. You can follow the yuan exchange rate and its detailed chart, for example, by creating an account on Webinar Universe.

Future predictions

The China Securities Journal, the national newspaper of securities in China, more and more often points to a moderate and not very dynamic increase in the value of the Chinese currency. Guana Tao, chief economist at BOC International, emphasizes the stability of the outlook for the yuan, while noting that the domestic balance of foreign exchange supply and demand will be maintained.

The approach of Credit Agricole analysts, despite positive Chinese export data, assumes weaker external demand, especially from the US and the EU, which may pose a challenge to the Chinese economy and potentially lead to a weakening of the yuan against the US dollar.

On the other hand, according to experts from the Pound Sterling Live portal, current market rates suggest the possibility of an increase in the exchange rate of the US dollar against the Chinese yuan in the very near future. Despite Beijing's aspirations to weaken the dollar's position as a global reserve, unfavorable forecasts and data are not conducive to the strengthening of the yuan, as we discuss in Webinar Universe.

All in all, the growing share of the RMB on the international arena is unlikely in the near future, as the euro now seems to be the main competitor to the dollar. The Chinese currency is still of limited importance and its share in the world's reserves is small, remaining at a single-digit level.

It is worth noting, however, that RMB is beginning to play an increasingly important role in international payments, especially in the commodity market. Still, according to data from the International Monetary Fund, the RMB's share of global reserves remains small.