The issue that can arise with this structure is that it gives Chinese banks opportunities to take advantage of pricing differentials.īelow are useful links for all the latest CNH Vs CNY trading forecasts and reports: CNH can be traded freely against other currencies in the international exchange markets, without any interference from Mainland China’s capital controls, as opposed to CNY which abides by restrictions imposed by the Chinese government.īasically, CNH and CNY are worth different amounts if compared to another foreign currency, and they both have their own sell, buy, and mid-market rate.Essentially, what this means is that at times there can be discrepancies between the exchange rates of CNH and CNY when compared to another foreign currency. The exchange rate of CNH vs CNY is decided by the free market which is determined by the People’s Bank of China (more on this below).There are two significant differences between the two denominations: What are the differences between CNY and CNH? It is freely traded on global markets, and so its value fluctuates based on buying and selling volume in the international exchange market. What is the CNH rate?Ĭontrary to CNY, CNH does not face the same governmental restrictions as CNY. The PBOC and SAFE are the equivalents of the Federal Reserve in the United States of America. The State Administration of Foreign Exchange (SAFE) is a secondary regulator that can also impact the exchange rate of CNY. Trades completed in Mainland China can then be done within 2% of this reference value. The central bank, the People’s Bank of China (PBOC), releases a reference rate every morning for CNY which is used in the trade market within Mainland China. The value of CNY is tightly managed and controlled by the Chinese government. The more active one is still Hong Kong by far, but some others are growing fast: South Korea, Malaysia, Singapore, Australia, Brazil, the United Kingdom, the European Union, and Canada. This inherently led to the development of more than 30 offshore RMB markets worldwide. It was marked with the creation of CNH, the offshore version of the Renminbi, where “H” actually stands for Hong Kong.įrom then on, more restrictions have incrementally been eased by the authorities. This was the first step into internationalizing the Renminbi. That year, for the first time in its history, authorities removed limitations on RMB trade settlements between China and Hong Kong. Up until 2009, RMB settlements were not permitted outside Mainland China. The origins of the offshore RMB (CNH) market To find out more about the Chinese currency, dive into this comprehensive guide by the DailyFX. We will cover this in more detail at a later stage in this article. They do not necessarily trade at the same price against other currencies. In conclusion, both CNY and CNH are a type of RMB, as such 1 CNY = 1 RMB = 1 Yuan and 1 CNH = 1 RMB = 1 Yuan. CNH is offshore RMB currency traded outside of Mainland China.CNY is onshore RMB currency traded within Mainland China only.So, whilst the offshore market refers to the Renminbi as CNH, in the onshore Mainland China market, the Renminbi is called CNY.Īs Mainland China is still not completely open to international foreign exchange and capital markets, the two types of Renminbi still remain a reality to this day: In a bid to begin internationalizing its currency, China launched an offshore version of the Renminbi called CNH. It was not so long ago that the Renminbi was not available to be traded outside of Mainland China. Understanding the characteristics and differences of CNY and CNH is key in navigating through China’s foreign exchange policy and the currencies’ roles in international trading. These two terms are less common than Renminbi and Yuan and you may wonder if they are just other names to call the same thing. Now, you may also have heard of CNY or CNH. The best analogy is to think of the Pound Sterling, which is the official currency of the United Kingdom, and whose unit is often referred to by a different name, the Pound or the Sterling. That’s the name by which many Chinese people call their currency.Īlthough Renminbi and Yuan are often used interchangeably, the Yuan is technically a unit of the Renminbi currency. On this note, if you have been to China, you must also be familiar with the Yuan (¥). However, in reality, the Renminbi has multiple names for different purposes. Renminbi is the official name of Mainland China’s national currency and it actually means “people’s currency” in Mandarin. As Mainland China’s economy is now the 2nd largest in the world, you must have become familiar with the Renminbi and its abbreviation RMB.
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