The Renminbi, China’s legal currency, is issued and controlled solely by the People’s Bank of China. The exchange rates of the Renminbi are decided by the People’s Bank of China and issued by the State Administration of Exchange Control. China operates foreign exchange in a unified way, with the State Administration of Exchange Control exercising the functions and powers of exchange control.
In 1994, China reformed the foreign exchange system, combined the Renminbi exchange rates, adopted the bank exchange settlement system and set up a unified inter-bank foreign exchange market. On this basis, China included the foreign exchange business of the foreign-invested enterprises in the bank’s exchange settlement system in 1996. On December 1, 1996, China formally accepted Article Eight of the Agreement on International Currencies and Funds, and realized the Renminbi’s convertibility under the current account ahead of schedule. In 1997, when confronted with the Asian financial crisis, the Chinese government declared that the exchange rate of the Renminbi would remain stable, and the Renminbi would not be devalued. This earned China the praise of the international community. In 2001, China’s foreign exchange reserves reached US$ 212.2 billion. In addition, the variety of financial businesses has been increasing steadily, and China has opened an array of new businesses to become integrated into the various aspects of modern international financial business, such as consumer credit, securities investment funds and investments linked with insurance.
