Chapter 84 The Renminbi: A Currency for the People

In 1953, when the government completed unified finance and the national prices were basically stable, Chen Yun proposed to issue a new RMB. At the end of 1954, the Central Committee of the Communist Party of China instructed that "the current renminbi has lost its role in calculation. In terms of international perception, it has a bad psychological impact on the domestic people. In order to further improve and consolidate our country's monetary system, organize currency circulation and reduce the denomination, Easy to calculate and use".The central government approved the issuance of new RMB in 1955. Considering that the first two months of the year were holidays, the new currency was changed to March 1.

The introduction of the new renminbi must address two major issues: first, whether the renminbi is pegged to gold; second, how to exchange the old and new currencies. In the era when the gold content of currencies is generally implemented in the world, Chen Yun strongly advocates that the RMB should not be linked to gold, and the gold content of the RMB should not be regulated. Why did Chen Yun have so many worries when setting up the gold content of RMB?This also involved the loss of office of Soviet Foreign Minister Gromyko. On April 30, 1951, Stalin personally proposed that the Political Bureau of the CPSU Central Committee made a decision to revoke a decision made by the State Bank of the Soviet Union on April 5 on the exchange rate between the ruble and the renminbi.The governor of the National Bank and the Minister of Finance were given warnings, and Foreign Minister Gromyko was downgraded to the British ambassador because Gromyko made Stalin furious on the exchange rate issue.

At the beginning of the founding of New China, Mao Zedong and Zhou Enlai went to Moscow successively to negotiate and sign the "Sino-Soviet Treaty of Friendship, Alliance and Mutual Assistance" with Stalin and other Soviet leaders, which established the Sino-Soviet strategic alliance in legal form.The most intense debate between the two sides was the exchange rate between the ruble and the renminbi, and the Soviet government made careful preparations in this regard. The Soviet side did not and did not want to follow the general international practice to determine the ratio of the ruble to the renminbi based on the comprehensive index of major product prices. Instead, it adopted the method of raising the ruble and lowering the renminbi.The Soviet side first confirmed with China that the exchange rate between the ruble and the renminbi is calculated in dollars.After Mao Zedong negotiated the general framework of the treaty and left the Soviet Union, they immediately announced to increase the exchange rate of the ruble against all foreign currencies including the US dollar, increasing the purchasing power of the ruble by 30% in one fell swoop, which greatly increased the exchange rate issue in the Sino-Soviet trade negotiations. difficulty.The Chinese representatives were very dissatisfied and raised different opinions on this.However, because China was eager to obtain materials and technology from the Soviet Union at that time, it had to make concessions and compromises, and determined the currency exchange rates of the two countries under unequal conditions.

Since then, China has been trying every means to change this exchange rate, adopting the same method as the Soviet Union, "treating others in the same way".According to the report of the Soviet ambassador in February 1951, the Chinese government has lowered the exchange rate of the US dollar four times since the end of 1950. Since the exchange rate between the ruble and the RMB is calculated in US dollars, the decrease in the exchange rate of the US dollar directly leads to the decline of the exchange rate of the ruble to RMB, that is, from 1 ruble. To exchange RMB 5720 yuan.The report estimates that the exchange rate between the ruble and the renminbi calculated in US dollars is about 20% lower than the exchange rate calculated based on the official price of gold purchased by the People's Bank of China.Therefore, it is not normal for the lowering of the exchange rate of the US dollar in China to automatically lead to a lowering of the exchange rate of the ruble against the RMB, which is not good for the Soviet Union politically and economically. unfavorable.

"The Soviet embassy suggested that the Ministry of Finance and the State Bank of the Soviet Union should negotiate with China in order to determine the exchange rate between the ruble and the yuan based on the price of gold. On April 5, the State Bank of the Soviet Union formulated a document on the exchange rate between the ruble and the yuan. The specific content is unknown, but according to the recollection of Dobrynin, then ambassador to the United States, this document was more beneficial to China. When Deputy Foreign Minister Zorin submitted this document to Acting Foreign Minister Gromyko for review, Gromy On the one hand, Ke was cautious and did not dare to make decisions without authorization. On the other hand, he thought that the exchange rate was not a major issue, so he did not want to disturb Stalin, so he put the document on hold. Later, the Chinese government and the Soviet embassy urged him again, and Zorin also expressed his support. Miko approved the document without asking Stalin, who was furious when he learned of this." [17]

Gromyko obviously did not fully understand the profound intentions of the great leader Stalin, and he made a big mistake once he was careless. When Stalin incorporated Eastern European countries into the Soviet Union's "socialist family", he had already thought of a strategy to control them economically.Since Eastern European countries insist on issuing their own currencies independently, they will make a fuss about the exchange rate.The Soviet Union was rich in gold, accounting for about 2/5 of the world's output at that time.Therefore, the Soviet Union deliberately set the ruble's gold content very high, far exceeding the actual purchasing power of the ruble.When evaluating the exchange rate, use the gold that is beneficial to you as the standard to take advantage of the exchange rate.Eastern European countries complained endlessly in private, but no one dared to confront the tough Stalin face to face.

In the negotiations between China and the Soviet Union, Stalin also used the same method to deal with China, which led to the sudden appreciation of the ruble against the US dollar after Mao Zedong left the Soviet Union.Stalin figured out that China had something to ask from the Soviet Union at that time, and would not be too tough on the exchange rate. Gromyko, who only has a diplomatic mind but not an economic mind, messed up Stalin's plan, how could he not become angry from embarrassment!Chen Yun understood that China had taken advantage of the exchange rate. If the gold content of the renminbi was announced, it would become a target for the Soviet Union to demand a redefinition of the exchange rate.

If the RMB does not stipulate the gold content, then what is the basis for the currency value?Chen Yun believes that the purchasing power of legal currency before the Anti-Japanese War is used as a frame of reference to evaluate the value of currency from the observation of social practice.Since the promotion of the legal currency in 1936, the national prices were basically stable, and the market responded well, and the currency value was moderate. Therefore, the new RMB should be roughly equivalent to 1 yuan, which is equivalent to the purchasing power of 1 legal currency in that year.Based on this, the exchange rate between the old and new RMB should be 1:10000.

As for the exchange method of old and new RMB, China adopts the principle of no difference in exchange, and adopts a unified exchange method for all RMB holders, regardless of deposits or cash.Its final effect is equivalent to reducing four zeros in all currency units, and the same is true for prices. It is equivalent to currency replacement, not currency reform, and there has been no significant change in social wealth. The issuance of the new RMB went very smoothly.Within the first 10 days of new currency issuance, the recovered old currency reached 80% of the total currency circulation in the market.As of June 10, 98.06% of the total circulation of old coins has been recovered nationwide. On June 10, 1955, the exchange of old and new RMB was basically completed, the market responded well, prices were basically stable, and the people actively supported it.It took China just 100 days to realize the replacement of the old currency with the new currency in a smooth manner, completely eliminating the inflationary remnants of the Kuomintang period.Since then, the RMB has started a new journey.

The reason why the RMB can stabilize the value of the currency and the reason why hyperinflation can be effectively curbed, in addition to the subjective reasons of effective measures, the objective factor is that the Chinese economy has achieved four major balances in a very short period of time: the balance of budgetary revenue and expenditure, and the cut off of currency. The root of inflation; the balance of currency and cashiers consolidates the source of currency stability; the balance of supply and demand for materials steals the bottom of speculative forces; the balance of foreign exchange imports and exports eliminates the road to currency panic.

Only with a completely independent currency can we talk about economic, political and military independence! After the Opium War, the imperialists controlled China's history through financial means through China's comprador bureaucratic bourgeoisie. Mao Zedong, Chen Yun and others knew it better than anyone else.For more than a hundred years in modern China, foreign capital forces, foreign comprador class, and bureaucratic landlord monopoly class have formed a huge, intertwined, and interlocking network of relationships. No matter which warlord is in power, no matter which government comes to power, they have to Rely on and borrow from this network of relationships.They colluded with each other, sheltered each other, and jointly exploited the masses of the people.It was only in 1949 that China eradicated this huge network of cancerous tumors by the roots, and even dug three feet into the ground to ensure that there would be no future troubles. Renminbi refuses to be pegged to any foreign currency in order to cut off the penetration and control of foreign capital forces in China from the root of finance. The purpose is to completely control China's financial high frontier. This is the highest financial strategy of the Communist Party of China! In the early days of the founding of the People's Republic of China, facing the sanctions of Western countries headed by the United States, China could only turn to the funds and technology of the Soviet Union. "According to Soviet statistics, from 1950 to 1961, the Soviet Union borrowed from China 14 times, totaling 1.818 billion rubles, including military loans of 200 million rubles for the Korean War, with an interest rate of 2%. During the War to Resist U.S. Aggression and Aid Korea, it has always been The Soviet Union has never stated that the arms provided by the Soviet side are war loans, but has always claimed that it is the compensation for China's sending troops to protect the interests of the socialist group, which is the responsibility of the Soviet Union. However, this part of the arms was later added to China's debt medium, and with high interest.” 【18】 In order to get rid of the Soviet Union's financial control, China must pay off the Soviet Union's loans as soon as possible. When the national power was not strong at the time, it tightened its belt and established an extremely strict state budget system, thus ensuring the independence of the RMB.By 1965, China finally fully paid off the Soviet Union's loan.At the end of the year, Foreign Minister Chen Yi proudly declared in an interview with Japanese journalists: "China has become a country without any foreign debts." The history of RMB is the history of serving the people, the history of independence, and the history of miracles created by practice!