THE DIFFERENCE BETWEEN ONSHORE AND OFFSHORE RMB (CNY & CNH) – AND WHY IT MATTERS
China is the world’s second largest economy, and the world’s largest trader in goods. It’s a country with huge opportunities for businesses large and small. Although it has opened up trading its currency, the Chinese yuan, knowing the differences between the domestic renminbi and the offshore renminbi will be a financial benefit for businesses of all sizes.
One of the world’s top five most-used currencies, the renminbi (RMB) is the official name of China’s currency. The Chinese yuan (CNY) is another name for China’s currency, and is the principal unit of RMB. The two names, renminbi and yuan, are interchangeable.
OPENING THE DOOR
In 2009, Chinese authorities lifted restrictions on RMB trade settlements between China and Hong Kong – the first time that RMB settlements were allowed outside mainland China. This was marked by the creation of the CNH, with the ‘H’ standing for Hong Kong.
Since then, these regulations have been gradually eased, leading to the development of RMB markets in Hong Kong and other offshore RMB markets like Australia, the US, Singapore and the UK as China gradually internationalized the renminbi. These exist alongside the RMB onshore market in mainland China, where buying and selling restrictions still apply. As a result, there are now two RMB markets: offshore and onshore.
Due to China’s cross-border currency controls, the Chinese yuan is allowed to trade for a different price in an offshore market like Hong Kong. In order to distinguish between these two prices, the unofficial abbreviation CNH is used to refer to the offshore price of the Chinese yuan (CNY). READ MORE