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China has a long monetary history, and there are at least 700 different
coin characters (also called legends). Chinese coins usually have two
or four characters, but they may also have as many as nine or as few as
none. Characters on the coin symbolize a wide range of things, such as
the name of the kingdom, the mint, the year, the denomination, the
monetary unit, or the government bureau that issued it. In the case of
Emperor Yong Li of the Ming Dynasty, the character could even be part
of a sentence. He issued coins with a declaration that was ten
characters long, featuring one character on each of the ten coins.
Before
the development of coins, the Chinese used other mediums of exchange,
including precious stones, brick tea, silk, and cowrie shells. The
first metal coins were formed into sycees
(called "boats" by Dutch traders because of their resemblance to the
hull of a ship). Later sword- and spade-shaped coins were developed and
still used sporadically until the early part of the Han Dynasty. The
coins in the museum collection are round with a square hole, a form
that was used after 523 B.C. The circular outline of these coins is
said to represent heaven, and the square center represents the earth.
The coins were cast from bronze and brass in molds and were strung on a
cord (usually around 1,000 coins) to form the main Chinese purchasing
unit. Source: Missouri Chinese Coins.
The Renminbi, or the RMB for short, is China’s legal tender. The exchange rate of the
currency has been fixed for the most part of the past half century with a few major
discrete changes. It has remained at around 8.28 yuan to the U.S. dollar since 1994,
when China adopted a managed floating exchange rate policy.1 The valuation of the
Chinese currency has received scant attention until recently when some people claim that
the currency is undervalued at its current level.
The economic reform started in 1978 has transformed China from a centrally planned
economy toward an increasingly market-oriented economy. China’s average annual
economic growth has been over 9% in the past two decades. At the turn of the new
century, China has become a major trading nation in the world and a prominent trade
partner with the United States. Due to China’s comparative advantage in labor-intensive
products, China is now a major source of labor-intensive manufactured products in the
world. China has also become one of the largest recipients of external investment in the
world in the past decade. China adopted current account convertibility in 1996 but
maintained foreign exchange control on the capital account, particularly on capital
outflows. The large inflows in foreign investment have contributed to a rapid buildup of
China’s international reserves in recent years.
China’s increasing international reserves and the rising U.S. trade deficits with China
have given rise to concerns over China’s competitiveness in the world market and
especially in trade with the United States. What has caused the U.S. trade deficits with
China? Is China’s currency undervalued so that it has given Chinese exporters an unfair
advantage over their competitors? Some people in the business world and their
representatives in the policy- making circle find ready answers to these questions amid the
slowdown in the U.S. economic growth and the claim that the United States has been
losing jobs in the manufacturing sector to foreign countries. People in this camp argue
that RMB is undervalued and urge China to revalue or float the currency immediately.
People on the opposite side of the debate argue that there is no convincing evidence that
the RMB is undervalued and warn that an immediate revaluation or floating of the
currency will hurt U.S. businesses and destabilize the international monetary system as
well as the Chinese economy.
Jiawen Yang, Haiyan Yin, and Hui He
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