The yuan is the base unit of a number of Chinese currencies, and usually refers to the primary unit of account of the renminbi, the currency of the People’s Republic of China.
China has historically pegged the yuan to a basket of currencies filled mostly with the U.S. dollar. It kept the yuan’s value in a 2% trading band around a “reference rate” that tracked the dollar’s value. That was around 6.25 yuan to the dollar. In other words, one dollar could be exchanged for 6.25 Chinese yuan.
On August 11, 2015, China modified its policy to allow the yuan to trade independent of the US dollar. Why is China changing its policy? On November 30, 2015, the International Monetary Fund (IMF) added the yuan to the world’s official reserve currencies. That also includes the U.S. dollar, the euro, the yen and the British pound. As a condition of receiving foreign exchange reserve currency status, the IMF required that China manage the yuan as central banks in most rich economies do their currencies, by letting market forces determine their value. In bringing the yuan into the SDR, the IMF had to determine that it is “freely usable”. Before coming to this decision, the IMF asked China to make changes to its currency regime.
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The yuan (// or //; sign: ¥; Chinese: 元; pinyin: yuán; [ɥæ̌n] ( listen)) is the base unit of a number of former and present-day Chinese currencies, and usually refers to the primary unit of account of the renminbi, the currency of the People's Republic of China. It is also used as a synonym of that currency, especially in international contexts – the ISO 4217 standard code for renminbi is CNY, an abbreviation of “Chinese yuan”. (A similar case is the use of the terms sterling and pound to designate the British currency and unit.)
A yuan (Chinese: 元; pinyin: yuán) is also known colloquially as a kuai (Chinese: 块; pinyin: kuài; literally: "lump"; originally a lump of silver). One yuan is divided into 10 jiao (Chinese: 角; pinyin: jiǎo; literally: "corner") or colloquially mao (Chinese: 毛; pinyin: máo "feather"). One jiao is divided into 10 fen (Chinese: 分; pinyin: fēn; literally: "small portion").
The symbol for the yuan (元) is also used in Chinese to refer to the currency units of Japan and Korea, and is used to translate the currency unit dollar as well as some other currencies; for example, the US dollar is called Meiyuan (Chinese: 美元; pinyin: Měiyuán; literally: "American yuan") in Chinese, and the euro is called Ouyuan (Chinese: 欧元; pinyin: Ōuyuán; literally: "European yuan"). When used in English in the context of the modern foreign exchange market, the Chinese yuan (CNY) refers to the renminbi (RMB), which is the official currency used in mainland China.