CNH vs CNY: the Differences in Chinese Renminbi
China has been known for some time now as the largest retail market in the world, so it goes without saying that breaking into that market can be a huge opportunity for businesses, eCommerce or otherwise.
But when you do start dealing with businesses in China, there’s one curious difference you’ll notice to most other countries: they have one official currency, the Renminbi—but this is divided into two types of currency. And both of these are known as Yuan.
This can be a jarring moment for first-timers, and poses the question: which one is right for my business? So let’s have a look at these currencies, and associated terms, and find out what they actually mean.
A quick look at Chinese Renminbi
So what’s Renminbi? Renminbi is the official name of the currency of the People’s Republic of China. Much like the Australian Dollar, US Dollar, or Pound Sterling, Renminbi translates to ‘people’s money’. Renminbi is often abbreviated to RMB, and is often the preferred term when talking about Chinese currency in financial circles.
While Renminbi is the official name of the currency, yuan is the unit of currency. Think of it like this; In England, their currency is officially called Pound Sterling, but the unit of currency is called a Pound. The symbol for Yuan is ¥ (same as the Japanese Yen).
Makes sense so far, doesn’t it? But then comes another difference. There are two types of Yuan: CNY and CNH.
CNH vs CNY
These are two types of Renminbi, each one covering a different major trading market:
CNY. CNY is Renminbi that’s traded on mainland China
CNH. CNH is Renminbi that’s traded offshore from mainland China, such as in Hong Kong
What are the differences between CNY and CNH?
While both the CNY and CNH are types of currencies for the same country, and both worth the same amount of Renminbi—they’re not technically the same currency. Both of these currencies have different exchange rates and are traded at different amounts.
And, as they have different exchange rates, they’re worth different amounts—but not against each other.
In China, you’re simply dealing with Chinese Renminbi. It’s all the same Renminbi, whether it’s CNY or CNH. Exchanging the two works at a 1:1 exchange rate.
It’s only when the RMB is subject to external factors do the differences in exchange rate become apparent.
Why are they different?
CNY is government-controlled, designed to enable greater charge over its domestic currency and empowering trade between Chinese companies.
Foreign businesses who trade within mainland China can still accept CNY as payment, but if they want to use Renminbi offshore, they’ll need to exchange CNY to CNH.
CNH, on the other hand, is designed as an offshore version of Renminbi. This way Renminbi can be freely traded, and is essentially controlled by the will of the free market which determines its value, while still ensuring China’s internal Renminbi remains strong.
So, is RMB the same as CNY?
RMB and CNY are essentially the same thing.
Think of it this way. It’s like you were to go out to a cafe in Australia: you’d buy a coffee, it might cost you $4.50. You’d hand over $5, and get 50c in change. You’re giving and receiving dollars and cents —but it’s all still the Australian Dollar.
The relationship between RMB and yuan is the same. In these terms there’s essentially no difference: Chinese Renminbi is the official currency, yuan is the name of a unit of Chinese Renminbi currency.
What does this mean for businesses who want to send money to China?
If you’re looking to send money to China, it’s important to be aware of which currency you’re operating in. You’re dealing with RMB, you know that. And you can certainly send money in CNY. But if you receive money from a Chinese business, it’s likely to be in CNH. So it’s important to note that there may be an exchange difference in your dealings there.
You should also be aware of restrictions and requirements on international money transfers, in order to ensure a smooth flow of funds. For example, the order information is required by the Chinese State Administration of Foreign Exchange on CNY inbound transactions, to prove the source of the funds. Banks will need order information to record the funds to accounts.
An Airwallex Global Business Account is a better banking alternative
Airwallex is making digital business finance easy with our Global Business Account.
You get all the benefits of a digital business account, but with added benefits and features that are built for a global scale.
You can set up a Foreign Currency Account in seconds, and start transacting straight away. Your Global Account lets you send, receive, and hold CNY. You get to keep it safely in your Virtual Wallet, and hedge against currency fluctuations that can easily eat into your profit margins.
When you send CNY to your Chinese business contacts, you’re able to access our interbank exchange rate, plus a simple 0.3% fee —much better than any big bank can offer. You can even empower your team with multi-currency virtual payment cards, allowing them to continue your business in China, and around the world.
Syncing directly to Xero, each of your CNY transactions are logged automatically to your CNY account, meaning you can keep track of all your dealings wherever you go.
Get in touch with Airwallex today to discuss how a Global Business Account can take the headache out of CNY vs CNH.
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