Yuan (China)
| Yuan | |
|---|---|
| 圓 / 元 | |
| Denominations | |
| Subunit | |
| 1/100 | cent |
| 1/1000 | mwen |
| Banknotes | |
| Freq. used | 20, 10, 5, and 1 Yuan |
| Rarely used | 10,000, 5,000, 1,000, 500, 100, and 50 Yuan |
| Coins | |
| Freq. used | 50, 20, 10, 5, 2, and 1 cent(s) 5 mwen |
| Rarely used | 2 and 1 mwen |
| Demographics | |
| Date of introduction | Feb. 1, 1953 |
| User(s) | Republic of China |
| Issuance | |
| Central bank | Central Bank of China |
The Yuan or Chinese Dollar (Chinese: 圓／元) is the currency of the Republic of China. It is divisible into 100 cents (fen, 分), and each cent is further divisble into 10 mwen (文). China has at various points adopted currency systems based on a unit called the yuan, but the current system was imposed in 1953 and reformed in 1956.
History
Hyperinflation haunted China's economy in the first half of the 20th century due to monetary indiscipline, counterfeiting leading to lack of trust, and also lack of a centralized currency authority at times. When China was politically unified for the first time in 1930 since the end of the Qing dynasty, it had largely relied on the silver specie as its coin of trade, while for accounting purposes the silver content itself was calculated since the fineness of specie was frequently unreliable in large quantities. In imitation of international trends, the silver standard was replaced with fiat money in the monetary reform of 1934.
In the ensuing First Korean War, the relatively stable 1934 fiat dollar steadily devalued as the government issued more fiat banknotes to cover the costs of the war. By the end of the war in 1945, the fiat dollar had depreciated by about 90%. Yet after the war, the cessation of wartime production controls led to an immediate shortage of merchandise and agricultural products on the market. Eventually, inflation spiralled out of control in 1947, and by 1948 an average meal costed hundreds of thousands. Since the devaluation of currency was widely known, most recipients of money sought to convert it into bullion, shares, land, or goods as soon as possible, causing hoarding and discouraging production. Furthermore, a rapidly devaluing currency also meant govenrment revenues quickly became worthless, creating a vicious cycle by which more currency must be created to stave off bankruptcy.
Co-inciding with the constitutional convention in 1948, the fiat currency was demonetized (ceased to be valuable) overnight in May 6, 1948 and the gold standard instituted in its stead. The gold standard allowed the government to collect customs revenues in gold bullion from importers, which formed a lifeline of hard revenues until the re-imposition of income tax in 1961. Despite successfully ending hyperinflation, transitioning into the gold standard resulted in a near-reset of the Chinese economy because many businesses were unable to obtain sufficient currency to pay each other and employees; a barter system was widely seen in the late 40s.
As the government possessed gold reserves, it took a proactive role in putting money on the gold standard into the economy. The strength of the gold-standard Yuan became problematic, and currency stability permitted the government to change the structure of the money supply in 1952 to a combination of gold, foreign exchange, and shares in public companies.