Call for new 1,000-yuan note falls flat

By Tan Yingzi (China Daily)
Updated: 2009-03-11 07:47

A call for China to introduce a 1,000-yuan banknote has met with a mixed response from citizens and economists, with many publicly airing fears about the risk of counterfeits and inflation.

Zhu Zhengfu, a Chinese People's Political Consultative Conference (CPPCC) National Committee member for Guangdong province, raised the idea last week during a group discussion.

He suggested that high-denomination banknotes for 500 and 1,000 yuan would boost domestic consumption during the global financial crisis, as well as help protect the environment and save on labor costs.

"It would be very convenient and if people have more money in their wallet, they will feel the impulse to buy more things," he said, adding that it would also cut down on the use of paper and work for bank clerks.

But his proposal has so far failed to win much support.

"Only when China's economy develops very fast and its society needs large quantities of cash do we need such banknotes," said Cao Honghui, an economic researcher with the Chinese Academy of Social Sciences.

After several years of consecutive double-digit economic growth, China has lowered its target for annual Gross Domestic Product growth to a moderate 8 percent this year.

"China is experiencing deflation right now," warned Cao, "and issuing a 1,000-yuan banknote would lead the public to start thinking about inflation."

He said that since the 1990s the central bank and other departments had been studying the feasibility of issuing new banknotes in China, where the highest denomination is now 100 yuan. So far they had decided the country was "not ready".

Guo Tianyong, a professor at the Central University of Finance and Economics, agreed, adding: "The banknotes would also attract the attention of counterfeit syndicates."

Meanwhile, an online poll of 481 people conducted by Nanfang Daily in Guangdong last weekend found around 70 percent did not back the idea.

Many said China's large number of low-income workers, such as farmers and construction laborers, did not need a 1,000-yuan note.

"The 1,000-yuan notes can only boost the consumption of rich people, not the poor who have very little money to spend anyway," responded public servant Kang Jinghua. "The best thing to boost domestic consumption would be to increase income, not the number on the banknote."

Some also cited fears of being conned with a fake 1,000-yuan note. Liu Guifang, a retired worker, said: "I would be very cautious using them. It would be a huge loss to me if I get just one fake."

Another respondent, Zhang Yi, an IT engineer, also asked: "If the government issues a 1,000-yuan banknote, is it a sign of inflation?"

Although his suggestion has not been popular, Zhu, a senior lawyer, encouraged more common people like him to try and offer advice on the country's development.

"I'm not an economist and my suggestion may be wrong," he said during a Web chat last weekend, "but every citizen should contribute to the country, especially in times of difficulty. My suggestion may not be taken up at the moment but I believe, sooner or later, China will have 1,000-yuan banknote."