China: Getting to Know the CNY.
The yuan is the primary unit of Chinese modern currency or renminbi.
If you’re constantly getting confused between yuan and renminbi, all you have to remember is that the term renminbi is the official name of China’s currency while yuan refers to the actual units.
Although China is in the midst of reforming its exchange rate policies, the yuan still remains pegged to the U.S. dollar.
This means that if the U.S. dollar rises or falls in value, the yuan follows accordingly.
As such, CNY isn’t one of the commonly traded currencies in the forex market.
One problem with this peg is that it has caused tension between China and the United States, which has come close to naming China a currency manipulator.
Because the yuan is undervalued, haters claim that it gives China an unfair trade advantage and has been the main driver of Chinese growth.
To China’s credit, though, it has been gradually loosening the yuan’s peg in recent years.
They’ve done so by slowly introducing CNY-denominated bonds in Hong Kong.
Word on the street is that big financial players can’t wait to start changing their cash to yuans and investing in CNY-denominated assets.
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