19 January 2019
Images of fake 1,000 yuan and 500 yuan notes flooded Chinese social media site recently.
Images of fake 1,000 yuan and 500 yuan notes flooded Chinese social media site recently.

Who needs 1,000 yuan notes?

Images of “new” 500 and 1,000 yuan bills flooded social media sites recently, eliciting enthusiastic responses from Chinese netizens.

“Finally, it has arrived!” people remarked on the popular Twitter-like microblog

A closer look, however, will reveal that the “leaked design drafts” of the banknotes are actually fake, digitally manipulated images intended to deceive the beholder. Still, netizens forwarded the pictures to friends and family members with such gusto that the hoax was quickly accepted as fact.

The phenomenon clearly shows that many Chinese have long been waiting for the larger renminbi denominations to come into circulation. 

In some sense, the rumor about larger-denomination notes reflects the growing disposable income of the average working citizen in China; it’s more convenient to have crisp 1,000 yuan bills (better yet a credit card) than worn 10 yuan or 100 yuan bills when shopping for a Gucci bag.

It could also have been abetted by the growing perception that the renminbi will continue to appreciate as China’s economy strengthens.

But does China need 1,000 yuan bills at the moment?

Certain members of the Chinese People’s Political Consultative Conference, the nation’s political advisory body, proposed the issuance of larger notes at least three times in the past few years, but the central bank shot down the suggestion each time.

Speaking at a press conference in March 2012, PBoC deputy governor Hu Xiaolian said the central bank had no plans to issue larger banknotes in the short term. She cited several reasons, ranging from the inconvenience larger bills would cause when doing small transactions to increasing the people’s inflation expectations.

Besides, Hu said, the wide range of online payment methods in the market and the country’s mature credit currency system, i.e., plastic money, argue against the introduction of 500 or 1,000 yuan bills.

Make that re-introduction: the central bank had issued larger bills before. It introduced a 1,000 yuan note in 1948, 10,000 yuan in 1950 and 50,000 yuan in 1953. Those larger notes, however, were eventually withdrawn.

Currently, the largest denomination is 100 yuan (US$16.13), the fifth and latest edition of which was launched in 1999. Renminbi banknotes also include 1, 5, 10, 20 and 50 yuan as well as 1 and 5 jiao (10 jiao equals 1 yuan).

“I think it’s not necessary to issue high-value bills right now,” Professor Jin Xuejun {金雪軍} of the Zhejiang University’s College of Economics, told the Hong Kong Economic Journal’s EJ Insight in a phone interview. “Large banknotes may be necessary years ago because of the country’s relatively high inflation levels and undeveloped credit currency system.

“But nowadays, people don’t actually need large amounts of cash because more and more transactions and daily payments are completed by using credit cards and online payment methods. Meanwhile, the inflation rate is well under control,” Jin said.

According to a rough estimate made by Beijing News, the purchasing power of 100 yuan in 2013 was equivalent to only about 57 yuan in 2005.

During the past 13 years, China has seen two rounds of notable inflation—the consumer price index increased 19.43 percent from 2003 to 2008 and the uptrend continued after a plateau period in 2009, climbing 10.1 percent from 2010 to 2012, data from the National Bureau of Statistics showed.

But despite official concerns over rising property prices and pre-tapering hot money flows, China’s inflation rate in 2013 was seen at a manageable 2.6 percent.

Counterfeit money

One major argument PBoC’s Hu raised against larger banknotes is the likely increase in the incidence of counterfeit money.

That is so because the bigger the currency’s denomination, the higher the profit margin of fake-money makers.

In fact, counterfeit yuan notes have become a serious problem in Hong Kong, the world’s largest offshore pool of renminbi funds.

In the first 10 months of 2013, Hong Kong police seized about 3,900 counterfeit yuan bills, with nearly 90 percent in 100 yuan denomination, compared with about 2,500 fake Hong Kong dollar bills. Note that the volume of fake yuan notes seized was comparatively much bigger even if the Hong Kong dollars in circulation is far greater than that of the renminbi in the city.

Police seized 4,500 fake yuan bills in 2011 and 5,300 such bills in 2012, compared with 3,500 and 3,000 counterfeit HK dollar notes during the same period, the Hong Kong Police Force said in an email response to EJ Insight queries.

In the past two weeks, reports of fake HK$1,000 notes spreading across the city prompted many commercial establishments to stop accepting such bills from customers. Public concerns were not assuaged after a recent joint operation by Hong Kong and Macau police seized about 220 near-perfect counterfeit HK$1,000 bills in the two territories.

Hong Kong police maintain that the problem is well under control, considering only 1.4 counterfeit HK dollar bills per one million banknotes were reported in the city last year. That’s a far cry from the ratio of 28 fake local currencies per million in Canada, 34 in the eurozone, and 247 in Britain in 2010.

Hong Kong’s experience with phony banknotes should serve as a warning to all those Chinese netizens who exuded excitement at the supposed arrival of 1,000 yuan notes.

Be careful what you wish for, it just might come true — and turn out to be fake.

– Contact the reporter at [email protected]


EJ Insight reporter

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