Yuan vs. Renminbi: What's the Difference?

Yuan vs. Renminbi: An Overview

Chinese money goes by two names: the Chinese yuan (CNY) and renminbi (RMB), which translates to "People's Currency." The distinction between CNY and RMB is subtle. While RMB is the official currency of China, the yuan is the principal unit of account for that currency.

Chinese currency is an important topic, defining the economy of one of the world's biggest economic superpowers. It is also central to one of the most debated issues involving China: its perceived mercantilist policy of artificially undervaluating currency against the U.S. dollar, seen to give its exports an unfair price advantage.

Yuan (CNY)

In Mandarin Chinese, the character yuan is used for round or circular things. This word was also used for the silver Spanish dollars introduced by European merchants in the 17th and 18th centuries.

In 1889, China began to mint its own silver yuan coins. Both the Qing Dynasty and early Republican government circulated silver yuan coins and banknotes. Today, the traditional character for yuan is also used in the currencies of several Chinese-speaking regions, such as the New Taiwan Dollar, the Hong Kong Dollar, the Singaporean Dollar, and the Macanese Pacata.

In order to distinguish between the mainland currency with other uses of the word, the modern-day Chinese Yuan uses the abbreviation CNY. Forex brokers, for example, will quote prices with the ticker CNY.

The largest banknote is 100 yuan, followed by 50 yuan, 20 yuan, 10 yuan, 5 yuan, and 1 yuan. One yuan can be further divided into jiao and fen. There are 10 jiao in a yuan (like dimes in a dollar) and 10 fen in a jiao.

Renminbi (RMB)

The People’s Bank of China (PBOC) was established during the Chinese Civil War, and issued the first RMB notes in December 1948, about a year before the Chinese Communist Party defeated the Kuomintang government.

The currency allowed the new administration to unify the Chinese economy, which was then divided among several regional currencies. It also distinguished the new administration from the previous government, whose policies had led to high levels of hyperinflation. In 1955, the RMB was revalued at a rate of 10,000 to one, meaning that each yuan in the new series replaced 10,000 old yuan.

During the period of the command economy, the value of the RMB was tightly controlled, with one yuan pegged at 2.46 yuan to the U.S. dollar until 1971. As the Chinese economy began opening to the world market, the PBOC allowed the yuan to trade on international markets, although the floating exchange rate was still tightly controlled.

Key Differences

With Beijing looking at the internationalization of its currency, one question continues to perplex many: Does China have two currencies? Does it use CNY, RMB, or both?

RMB is the official currency of the People's Republic of China, and means "people's currency" in Mandarin. CNY is a unit of the currency. A popular analogy draws from British currency: RMB is the name of China's currency, just as sterling is the currency of Great Britain. A unit of renminbi is a CNY, just as the pound is the basic unit of sterling.

RMB and CNY are often used interchangeably. When shopping in China, a storekeeper might also express prices in terms of kuai, which translates into "pieces," and is similar to how Americans use "bucks" to mean dollars.

CNY is the official currency abbreviation for the Chinese yuan under the ISO 4217 standard. However, RMB is often used as an unofficial abbreviation. In addition, due to China's cross-border currency controls, the Chinese yuan may trade for a different price in offshore markets, such as Hong Kong. In order to distinguish between these two prices, the unofficial abbreviation CNH is sometimes used to refer to the offshore price of the Chinese yuan.

Special Considerations

For years, the Chinese yuan was not considered an international currency because of the Chinese government's rigid controls. However, this then began to change as the Chinese government started to promote the international use of the RMB.

China uses currency controls to maintain the value of the Chinese yuan at a favorable level. Every day the PBOC sets a midpoint value against the U.S. dollar, based on previous trading sessions and movements in international currency markets. The price of the yuan is allowed to trade within 2% of that price. At times, the midpoint may also be adjusted based on undefined "counter-cyclical" factors.

Some economists believe that these controls keep the yuan artificially devalued, making the country's exports more attractive. In the summer of 2018, the International Monetary Fund (IMF) reported that the Chinese yuan was in line with fundamentals, only to then witness the yuan reach a 13-month low in response to an escalating tariff war with the United States.

This drop prompted then U.S. Treasury Secretary Steven Mnuchin to comment that the Treasury was “going to very carefully review whether they have manipulated the currency.” In 2019, the U.S. Treasury labeled China as a "currency manipulator." This designation was removed the following year.

The Chinese yuan lost value during the COVID-19 pandemic, largely due to reduced economic activity and strict lockdowns. In April of 2022, the yuan suffered its largest-ever monthly price drop, losing 7% of its value over three months.

Today, the RMB is one of the top five most-used currencies, in addition to the U.S. dollar, euro, yen, and British pound. In 2022, the IMF increased the weight of the yuan in its Special Drawing Rights basket—an international reserve asset that the IMF created as a supplement to member countries’ official reserves.

The Bottom Line

The currency of China is referred to as either the Chinese yuan (CNY) or renminbi (RMB). The two terms are similar and often used interchangeably. The key difference between them is that the RMB is the official currency, while the yuan is its principal unit of measurement.