By Jacob Goldstein
Here's the short answer: Renminbi is the official name for the currency, and yuan is the main unit of currency.
Here's the long answer, plus a bonus audio clip to teach you how to say "yuan" and "renminbi" in Mandarin:
First, the audio clip. Thanks to Ying Wu, a professor of economics at Salisbury University in Maryland, for helping me understand the difference between yuan and renminbi -- and for teaching me to say the words in Mandarin, his native language. Here's how to say both words:
Now, the explanation:
1. Imagine a country that decided to use silver as its official currency. You couldn't just say, "Dude, you owe me seven silver." You'd need some kind of units. Pounds, for example. As in, "Dude, you owe me seven pounds of silver."
This something like what England did a long time ago -- it made sterling the currency, and pounds the main unit. Today, most people just say "pounds." Even though you can't go into a bank and trade a British pound for a pound of sterling silver, official documents (like this report from the Bank of England) still refer to the currency in abstract terms as "sterling."
2. For China, the currency is renbminbi. But, just like you can't say, "You owe me seven silver," you also can't say, "You owe me seven renminbi." The units are yuan, so you'd say, "You owe me seven yuan." At current exchange rates, one dollar gets you about seven yuan.
When you're speaking abstractly -- not about some particular number of yuan -- it's correct to say renminbi. You argue over whether the renminbi is undervalued in the same way you can argue over whether silver is undervalued.
Alex and David will have lots more in today's podcast on the fight over the value of the renminbi. We'll post the podcast on the blog later this afternoon.