The Chinese yuan or Ranminbei is the second largest economy in the world, and it is now one of the largest contributors to global growth. In 2024, China’s GDP reached 134.91 trillion yuan (18.8 trillion dollars) to maintain its position as the second largest economy behind the United States, according to the “China Bignging” platform.
China is the world factory and its industrial sector contributed about 30.1% of its gross domestic product, which is the largest contributor ever, followed by the wholesale and retail sector, which contributes about 10.2% and the financial sector that contributes about 7.3% of the country’s economic output, according to the Statista platform.
The yuan rose against the dollar, prompting China to reduce its value several times in 2015, and Chinese leaders said this was part of the country’s market reform efforts.
This in turn led to the opening of a trade war with the United States, which described China by manipulating currency, and the imposition of President Donald Trump at the time customs duties on Chinese goods starting in 2018, and China received a set of customs duties on American products according to the Investobide platform.
This scenario is now returning again with Trump’s return to the government and the commercial war that he started with the major economies of the world, and China responded similarly and reduced the value of the yuan.
Before entering the details of the date and future of the yuan and the war between it and the dollar, we have to differentiate between the “yuan” and “Renminbi” (Renminbi), which are two names that are used to exchange to indicate the Chinese currency, but they are the same?
Yuan and Ranebi
The Chinese currency has been known as the yuan since China was an empire, and its name changed the 1950s when the People’s Republic of China changed it to Ranminbe. However, the world still uses the term yuan according to the “Step” platform.
The yuan is considered a mathematical unit for the Chinese financial and economic system, and it represents one unit of money. On the other hand, Al -Ranminbe is the official name that the state adopts for the currency itself.
The yuan is shortened to “CNY” while the Ranminbei is shortened to “RMB” and the terms are usually used by exchange or together in some countries of the world, so it is not surprising that their use often leads to confusion of investors according to the “Investubia” platform.
To simplify the matter more on the reader, it is similar to the use of the dollar, synonymous with the “dollar”, although the official name of the currency in the United States is the “dollar”, it is in daily life referred to as the dollar. They are the same, as is the case for the yuan and the Ranebi, they are two names for one coin according to the “Wise” platform.
https://www.youtube.com/watch?v=hm55Lacf_F8
History of the yuan
When we talk about China, we refer to one of the oldest and richest cultures of the world that dates back thousands of years, and China was one of the leading countries in creating currency.
The first things that the Chinese used was a currency of marine shells, and later, bronze currencies were created as an alternative to that system.
The currency called Yuan was presented for the first time in 1889, influenced by the Spanish currency (the Biso), which was widely spread in Southeast Asia due to the Spanish presence in that region, according to the “ABC” platform.
In 1903, the Chinese imperial bank began to produce the yuan in the form of paper and coins.
The yuan continued the official currency of the imperial China until 1948, and with the Socialist Revolution in the aftermath of the Second World War and the founding of the People’s Republic, the name of the yuan currency was changed with “Al -Ranminbi” with the establishment of the People’s Bank, and it was released in 1949, and the translation of Al -Ranminbi is “the currency of the people” according to the previous source.
A major reserve currency for the World Bank
As China turned into one of the most prominent financing and trade centers in the world in the early 21st century, the Ranminbi rose as a global currency.
In a recognition of its high position, the International Monetary Fund announced in November 2015 that Al -Ranminbi included the Chinese currency as one of its reserve currencies, to join the dollar, the euro, the British British pound and the Japanese yen as one of the special withdrawal rights coins of the International Monetary Fund used in loans between governments, according to the Pretanica platform.
Wars of the yuan and the dollar
The relationship between the yuan and the dollar has witnessed major clashes over the past decades, as China has turned from a closed economy into the second largest economy in the world, and this shift led to economic and critical competition between the two currencies, especially with China’s endeavor to enhance the status of the yuan as an alternative global currency for the dollar.
China has maintained a fixed exchange rate for the yuan at 8.3 yuans against one US dollar from 1997 to 2005, which helped it strengthen its exports by keeping the low -value yuan, and the United States criticized this policy, considering that it gives China an unfair advantage in international trade, according to Reuters.
In 2003, American Senator Schumer submitted the first draft law in Congress aimed at the value of the yuan.
In July 2005, the People’s Bank decided to end the yuan’s connection to the dollar, and its value was determined at 8.11 yohn for the dollar, to apply a managed floating exchange rate based on supply and demand in the market in the light of a basket of currencies, and it is allowed to rise or decrease by 0.3% per day against the dollar from a reference price determined by the Chinese People’s Bank every day.
This led to the patronage of two members of the US Senate in 2006 a draft law to impose high customs duties on Chinese goods if Beijing does not allow the value of the yuan, which reflects the frustration of Congress on the American trade deficit escalating with China, which reached a record at $ 233 billion in 2006.
On November 11, 2009, the President of the World Bank at the time described Zulik the role of the dollar as a reserve currency as “relatively safe”, but he said that the Ranenbi will provide during the ten years to 15 years as an alternative as soon as it was internationalized according to the previous source.
On the same day, China has sent the clearest indication so far that it is ready to allow the value of the yuan, saying that it will take into account the main currencies, not only the dollar, to direct the exchange rate.
Drums
The conflict reached its climax in 2019 when the US Treasury Secretary at the time prompted Stephen Mnuchin, under the auspices of President Trump, that China is a country that manipulates the currency, which prompted him to work with the International Monetary Fund to eliminate the unfair competitive advantage left by China’s recent actions.
The same year is the creation of Congress – regarding total economic policies and foreign exchange policies of the main commercial partners of the United States – that China has a long history of facilitating the currency in less than its real value through the long and wide intervention in the foreign exchange market.
The report pointed out that China has taken concrete steps to reduce the value of its currency, while maintaining large foreign exchange reserves despite the active use of such tools in the past.
The context of these measures confirms that the purpose of reducing the value of the Chinese currency is to obtain an unfair competitive advantage in international trade, although the IMF opposed this opinion, and it was found that the value of the Chinese currency was fair.
This led to the establishment of the trade war against China, which had already started its first spark in March 2018 when President Trump announced that imposing customs definitions on goods imported from China, according to the “Science Direct” platform.
The Trump administration has already started imposing a series of commercial measures, specifically targeting imports from China, and in the first phase of the trade confrontation between the United States and China on July 6, 2018, each of the two countries raised customs tariffs over nearly $ 34 billion of commodities.
After that, until June 2020, almost all US imports from China were subject to new customs duties at different rates, and China responded with customs duties on imports from the United States, according to the previous source.
This war continued until 2020, when the United States retracted its decision to classify China, a consolidated country in the currency, and the United States said it made this change because China agreed to refrain from reducing the value of its currency to make its goods cheaper for foreign buyers.
The future of the yuan and challenges
The yuan is a currency of increasing importance in the global financial system, and China seeks to enhance its role on the international scene through a number of initiatives, the most important of which are:
- The growing internationalizationChina has succeeded in persuading countries, companies and central banks in many countries of the world to increase the use of the yuan, and to achieve this purpose, Beijing worked to enhance regional and multilateral cooperation.
For example, Beijing is working to push the countries that make up the Brax group, led by Brazil, Russia, India, China and South Africa, to enhance the use of local currencies, including the yuan, in trade and investment. - In 2016, China, through negotiations with the IMF, succeeded in making the yuan one of the international currencies that can be one of the components of foreign exchange reserves for countries.
- Digital yuanChina is seeking to digitize its currency to enhance the efficiency of its financial system, and the director of the Institute for Digital Currency Research at the Chinese People’s Bank, Mu Changchon, stressed the need to adopt the entire retail sector for digital granulippe to modernize the financial infrastructure in China in accordance with the global government financial technology platform, Global Goventen Ventic, and the Queen Telegraph platform.
https://www.youtube.com/watch?v=s9s2objavju
The most important challenges
Despite the ongoing efforts to strengthen the role of the yuan in the global financial system, the replacement of the US dollar with the yuan as a major backup currency faces great challenges, the most important of which are:
- The yuan is still not circulating freely, which limits its extensive adoption according to Reuters.
- The strength of the dollar and its dominance over the global markets: The United States represents about 25% of the global GDP, but nearly half of the international payments were settled in dollars last year, according to the data of the Chinese People’s Bank, while nearly 60% of foreign exchange reserves with all global central banks are denied in dollars according to the previous source.
- Exchange rate fluctuations: The Chinese People’s Bank set a new installation for the yuan against the dollar last February, in response to the customs tariffs imposed by Trump on Chinese exports, and the bank set the price of the yuan fixing at 7.1693 against the dollar compared to the price of 7.1698 set by late January, which fuel the trade war with the United States according to the morning newspaper “South China”.
This process raises the concern of investors and companies, as the markets are afraid of great fluctuations in exchange rates, while continuing the negative effects of American customs duties on global trade and money flows. - Geopolitical tensions: The strained relations between China and the United States affect the stability of the yuan, as American commercial and economic policies may lead to additional pressure on the Chinese currency. For example, Trump recently threatened to impose 100% customs duties on imports from countries that avoid using the dollar in their commercial dealings.
While the yuan seeks to enhance its global position through initiatives such as digitization and increasing its use in international trade, it faces challenges related to exchange rates and geopolitical tensions that may affect its stability and future development.
