1. CHINA Presentation By, Raja.A,40 Finance 3 FW0709 MULTINATIONAL BUSINESS FINANCE

2. CENTRAL BANK

ThePeople's Bank of China( PBCorPBOC ).

Established on December 1, 1948 based on the consolidation of the former Huabei Bank, Beihai Bank and Xibei Farmer Bank.

The Governor of the People's Bank of China is nominated by the Premier and approved by the National People's Congress, and is also member of the State Council.

The current Governor is Zhou Xiaochuan.

- Raja.A, 40, FW0709 Slide 02 of 12 3. MAJOR FUNCTIONS OF PBC

Issuing and enforcing relevant orders and regulations.

Formulating and implementing monetary policy.

Issuing Renminbi (Yuan) and administering its circulation.

Regulating inter-bank lending market and inter-bank bond market.

Administering foreign exchange and regulating inter-bank foreign exchange market.

Regulating gold market.

- Raja.A, 40, FW0709 Slide 03 of 12 4. MAJOR FUNCTIONS OF PBC

Holding and managing official foreign exchange and gold reserves .

Managing the State treasury & maintaining normal operation of the payment and settlement system.

Guiding and organizing the anti-money laundering work of the financial sector and monitoring relevant fund flows.

Conducting financial statistics, surveys, analysis and forecasts.

Participating in international financial activities in the capacity of the central bank.

Performing other functions specified by the State Council.

- Raja.A, 40, FW0709 Slide 04 of 12 5. MONETARY SYSTEM HISTORY OF MONEY

First object as money Natural Seashells.

Bronze Age Bronze coins.

Spring & Autumn & Warring States Periods(770 ~ 221 BC) Cloth coins, Knife coins, inscribed Bronze shells and round coins.

The Qin Dynasty(221 ~ 207 BC) Ban liang (half teal) coins.

Xing Mang period(9 ~ 25 AD) yi dao ping wu qian (one dao equal to 5000).

The Tang Dynasty - coins, called Kaiyuan Tongbao.

Northern Song (960 ~ 1127 AD) - Dui pin coins.

- Raja.A, 40, FW0709 Slide 05 of 12 6. MONETARY SYSTEM HISTORY OF MONEY

Southern Song (1127 ~ 1276 AD) - The Chunxi Yuanbao coins.

After two Song dynasties - Paper money.

Ming Dynasty (1368 ~ 1644 AD) - A mixture of paper money, copper coins and silver was used.

Jiajing era (1522 ~ 1566 AD) - Zinc started to be added to the bronze to produce brass, another alloy from which coins could be minted.

Daoguang Emperor (1821 ~ 1850 AD) - Created first draft bank.

October 18 th1860Causing Severe Currency Devaluation.

- Raja.A, 40, FW0709 Slide 06 of 12 7. MONETARY SYSTEM HISTORY OF MONEY

In 1897 - China's first bank - the Imperial Bank of China.

In 1905 - The Qing government established the first state bank in Chinese history, the Da Qing Bank.

Before the end of the Qing dynasty (1910) - The Westernization Movement.

The crystallization of folk culture - Yan Sheng money.

Oriental monetary culture - The Oriental currency system.

In 1911 - The Da Qing Bank was renamed Bank of China.

The Republic of China (1912 ~ 1949) - Silver dollars (yuan) started to be used.

- Raja.A, 40, FW0709 Slide 07 of 12 8. MONETARY SYSTEM HISTORY OF MONEY

December 1st 1948 - The People's Bank of China was founded and started to issue Renminbi.

March 1 st1955 - The People's Bank of China issued new currency (the second version of the Renminbi).

April 20 th1962 - The third version of the Renminbi.

April 27 th1987 The fourth version of Renminbi.

In 1999 The fifth version of Renminbi.

In 1999 -Red 50.

In2000 - Orange polymer note.

2008 Beijing Olympics - A green 10.

- Raja.A, 40, FW0709 Slide 08 of 12 9. EXCHANGE RATE ARRAGEMENTS

Current Exchange rate system Conventional Fixed Peg Arrangement.

Dual Exchange rate regime in the early 1990s.

Unified in 1994.

Since 1995, the Renminbi has been maintained at a fixed parity relative to the US dollar.

The RMB initially launched at an exchange rate of RMB 8.7 to the dollar then to around RMB 8.3 to the dollar.

In 1996 and 1997, China was still optimistic about full convertibility of the RMB.

- Raja.A, 40, FW0709 Slide 09 of 12 10. EXCHANGE RATE ARRAGEMENTS

A pure floating of the currency was not a viable choice for china at that time.

The intermediate arrangements between a peg and a pre-floating system was quite useful for China in the mid term.

Managed Floating exchange rate system with capital account convertibility is appropriate.

On 21 July 2005, the Renminbi was revalued by 2.1% relative to the US dollar.

- Raja.A, 40, FW0709 Slide 10 of 12 11. CRISIS

1985-1987.

1993-1994 (Inflation & Banking crisis).

1997-1998 (ASIAN Financial crisis).

SCAMS:

• • China Milk Scandal.

- Raja.A, 40, FW0709 Slide 11 of 12 12. THANK YOU...