Why Is China Afraid Of Issuing Large Bills?

In 2004, Zong Licheng, vice chairman of the CPPCC National Committee and Shandong Federation of industry and commerce, proposed in the proposal to issue RMB 500 or 1000 yuan in large denomination so as to meet the needs of economic and social development and reduce the cost of currency circulation. At that time, the reply of the central bank officials was that the time to issue large bills was not yet ripe.

In 2012, Zong Licheng again proposed the proposal to issue a larger denomination of RMB. He pointed out that with the increasing income of Chinese residents, the consumption level and purchasing power of residents increased day by day, and the social price index also increased, which accelerated the circulation of money and the speed of capital turnover. Therefore, China is in urgent need of large denomination of RMB.

Many experts believe that the issuance of large par value currencies has many advantages, such as reducing the amount of labor to check the number of banknotes, reducing the risk of theft, carrying and storing more conveniently, reducing the amount of banknote wear, reducing the cost of printing banknotes, and saving paper.

According to Mao Yushi, a famous economist, the amount of 500 yuan large banknotes can be reduced by about 1 billion to 2 billion yuan a year, and the loss will eventually be indirectly borne by taxpayers.

Economist Mao Yushi has repeatedly advocated the issue of 500 yuan denomination of RMB since 1997. Chen Zhendong, chairman of the CPPCC National Committee and chairman of the board of directors of Hongkong Yuzhen Holding Group Co., Ltd., during the two sessions of 2010, said that the time to issue 500 yuan large amount of RMB cash was ripe. Economist Li Daokui said he supported the issue of RMB denomination of 500 yuan.

It is understood that the largest denomination of a currency is determined by socio-economic and financial markets, including the stages of economic development, people's living standards and purchasing power. If the renminbi depreciates, prices rise to a certain level and people's consumption level reaches a certain level, a larger denomination of RMB will also appear.

Let's look at how much changes have taken place in people's income level after the issue of 100 yuan. In 1988, the per capita income of urban residents in China was 1119 yuan, which means that the per capita income per month was less than 100 yuan. When the monthly income was less than 100 yuan, the circulation of the largest denomination of the currency was 100 yuan.

In 2010, the per capita disposable income of urban residents in China was 19109 yuan per year, and the difference between them was ten times. Why can't they circulate the currency of 500 yuan?

Zhong Wei, a financial expert at the financial research center of Beijing Normal University, had previously believed that the monetary income of Chinese residents has increased substantially, so that they already have the basis for the introduction of 500 yuan denominations. In addition, compared with the currency denomination issued abroad, China's largest denomination is obviously smaller.

In fact, the highest denomination of money is determined not only by economic factors, but also by people's habit of using money, the objective needs of commodity circulation and the stability of currency value. For example, European and American countries do not like high denomination banknotes, they try to pay by bank card or credit card, but the euro area's largest currency is 500 euros, which mainly respects the tradition of using large denomination banknotes in individual countries, and also eliminates the service charge of transnational credit card.

In this case, why do Chinese people fear the issue of large denomination of RMB? In fact, there is an important reason, that is, social psychology: that is, Chinese people still have the fear of "Republic of China Gold certificates".

According to the information, in August 19th 37, the Kuomintang government implemented currency reform, abolished legal tender and circulated gold certificates. 1 yuan in gold and 3 million yuan in French currency. 3 months after the issuance of gold dollar certificates, prices rose sharply, and the value of the currency plummeted to the first half of the next year, which was rejected by the masses.

In other words, it is because of the fear that Chinese people exist in the golden circle that they will appear "once they are bitten by a snake, and ten years are afraid of the rope". As long as someone raises RMB 500 or 1000 yuan, he will strongly oppose it without any reason. He will consciously or unconsciously issue RMB 500 or 1000 yuan in large denomination.

It was associated with the poor life of a "sack of paper money that could not buy two bags" in the Republic of China.

In fact, the issuance of large denomination of RMB is of little practical significance in the case of total currency control, but its symbolic significance is far greater than the actual significance. Because the currency with a face value of 1000 yuan is easy to let the society produce a psychological hint that the currency is issued in large quantities and the liquidity is once again overflowing compared with the current maximum value of 100 yuan RMB, which is not the result of the central bank's desire.

Societe Generale Bank chief economist Lu commissar believes that the issuance of large Renminbi should still be inappropriate. One of the main reasons is that for the huge demand for transactions in the economy, in fact, online payment and mobile electronic payment have basically been completed. There is no need to issue large renminbi to support the so-called big deal. In addition, the large amount of RMB in the face of counterfeit money actually increases the cost of identification. People worry about the large amount of counterfeit money, and also increase transaction costs, so it is prudent to issue large bills.

Guo Tianyong, a professor at the school of finance, Central University of Finance and Economics, thinks that issuing large denominations of RMB should be prudent. Money is meant to make goods exchange more convenient. In theory, issuing large bills can make transactions more convenient and understandable. However, under the current situation, issuing large bills will contribute to the expectation of inflation and asset bubbles.

After all, the issue of large renminbi is related to the livelihood of the people. We should investigate the needs of the private sector. It is inevitable for the development of the social and economic development. However, it is considered that China's economy is in a period of transformation. Any measures may trigger the butterfly effect of the economy. It is considered that the current value of RMB 100 yuan is still very useful to the most populace of China.

As we all know, devaluation is a manifestation of inflation. In fact, inflation is only related to the circulation of paper money, and is not necessarily related to the denomination structure. The panic comes from a false belief that the issuance of large denominations means the growth of total issuance.

Actually, issue Large denomination note It is only the change in the face value of the RMB unit, the unit face value is large, the number of notes issued can be reduced, the total amount of the issue will remain unchanged, and this will certainly not cause inflation.

Moreover, with the continuous development of a country's economy, the issuing amount of a currency is increasing, which is also a common phenomenon in the history of money. In addition, as China's position in the world economy is becoming more and more important, the RMB will play an international monetary role in neighboring countries.

As currency, the denomination of the renminbi is only a code name. Neither the big nor the small is mainly concerned with whether it is comparable to the economic strength of the country.

Because the state does not issue large denominations. RMB If prices rise, they will still go up. depreciation Or to depreciate, which is not related to the issuance of large denomination of Renminbi.

Moreover, now has entered the era of "card", do not say that the wage paid by the unit staff has no cash, directly count with "bank card", that is, people go shopping and shopping, and have been accustomed to "credit card" instead of cash.

Therefore, whether it is large denomination or small face value, it is only a figure for the units and consumption. From this point of view, the issuance is not the same as the renminbi denomination of large denomination, which does not affect the circulation of money at all. This is just a figure.