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China Seeks Higher Denominations
By Richard Giedroyc

There likely aren't many readers who collect the base metal composition coins of the Peoples' Republic of China, but these low-denomination coins occasionally appear at coin shows. They are of low enough value both in denomination and collector value it is relatively easy to build a set on a very modest budget.

Bank notes of the PRC likewise have little purchasing power. Envision the highest denomination bank note in circulation in the United States being the $2 bill and you can appreciate what the merchant and consumer in China are dealing with. China has lots of coins and bank notes, but none of them are of high enough denominations to address the price of goods and services in everyday life. Inflation is present, but it's not the real problem. It's just that China is hurting for higher denomination coins and bank notes.

Hopefully this may soon change. According to the March 12 issue of China Review, Deputy to the National People's Congress He Daxin recently proposed that the Central Bank of China issue bank notes in denominations of 500 and 1,000 yuan "to save social costs." The largest bank note now in circulation is 100 yuan, with an equivalent value of about $14.60 US. Coins have minimal purchasing power as well, but He did not address any change in the current coinage in his recent proposal.

In making his proposal to the NPC (which is China's top legislative assembly) He said, "With a rapid economic development, it is common that people pay more than 1,000 yuan in one daily transaction. The Chinese people still prefer cash to bank cards in their daily life," adding, "It would be a blessing for the taxpayers [to make higher denominated currency available]."

He's proposal quickly followed a March 5 suggestion made by a southern Guangdong province delegate named Zhu Zhengfu at the 11th National Committee of the Chinese People's Political Consultative Conference session held in Beijing.

The March 10 China Daily said of Zhu's proposal, "The proposed bank notes would also alleviate the burden of bank employees who are busy counting notes every day& A political advisor has proposed China should issue bigger bank notes like 500 and 1,000 yuan notes to spur domestic consumption and protect the environment."

Zhu's reference to the environment, according to sources, was a reference to how labor intensive the production and use of currency has become.

Coin and bank note production in China is operated by the state-owned China Banknote Printing and Minting Company. CBPMC has its headquarters in Beijing, however bank note production facilities are located in Beijing, Chengdu, Nanchang, Shanghai, Shijiazhuang and in Xi'an, making distribution easier. CBPMC also owns and operates the mints in Nanjing, Shanghai and Shenyang.

The coinage now in use was introduced in 1991. It consists of an aluminum 1 jiao, brass composition 5 jiao, and a nickel-steel 1 yuan. Collectors should be aware 1-, 2-, and 5-fen coins were no longer made for circulation beginning in 1992, then re-introduced in 2005. Despite this interruption in production these three denominations have been included in annual mint sets in the years the coins were not made for circulation. Merchants increasingly round prices up in yuan denominations rather than price things "to the penny" as typically happens in the United States. Since something priced at nine yuan is typically rounded to 10 yuan as well, this increases the demand for larger denomination bank notes.

Zhu acknowledged that he isn't the first Chinese politician to try to legislate higher denomination currency. Zhu said, "Times are different now. People used to worry about inflation before because of the overheated economy; but at present with the global economic downturn, people are more concerned about deflation. Therefore, it's the right time to issue bigger bank notes."

Zhu added, "Compared to these world major economies (noting the US 100 bank note has a value of 684 yuan), the face value of renminbi [yuan] is not big enough, and I think the issuance of a larger valued bank note will come true sooner or later."

 



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