CNH vs CNY: the Differences in Chinese Renminbi
China has taken its place as a leading producer and exporter of goods on an international level. Focusing on the well-being of its economy, the growth China has seen over the last century is remarkable. By placing the focus on energising its economy, China has become a contender in extraordinary advancements within the global economy and trade market.
As the world’s second-largest economy, China is also home to several of the most powerful technology companies, with global reach and innovative technologies that will have exceptional impacts on our planet’s future overall. The Chinese people’s hard work has come to fruition. Their support, talent and ingenuity are a major contributor to the growth of their energised economy.
It’s essential to understand China’s CNH currency and how CNH and CNY differ.
In 2016, the renminbi (RMB) and CNH currencies were included on the list of most-used currencies, joining the US dollar, euro, yen and British pound. The International Monetary Fund (IMF) declared the equality of the RMB and the US dollar, but this is no longer valid in 2022 after the COVID-19 pandemic and recent economic decline.
Today, the RMB is ranked below the US dollar according to the Special Drawing Right (SDR). Created by the IMF, the SDR is an international reserve established to support other countries’ reserves. Based on a blend of currencies from all over the world, the SDR includes the US dollar, Japanese yen, euro, pound sterling and Chinese Renminbi.
When Chinese export costs increase, the country’s trade market suffers and ultimately loses its competitive prices, which appeals to the rest of the world. And the Chinese economy thrives on its ability to keep costs lower than other countries’ products, trade rates and employment rates. However, the Central Bank of the Republic of China monitors exchange rates and will adjust costs accordingly to avoid any negative effects of the CNH and the RMB.
China’s challenging currency
The RMB has seen its share of challenges over the years, predominantly due to the Chinese government’s constraints on the currency. Historically known as a leading force in the world’s retail industry, China offers extraordinary opportunities for businesses to thrive in the international market.
Interestingly, China’s two types of currencies can cause challenging circumstances when trading with China. After breaking into the market, you’ll become aware of China’s unusual currencies, CNH vs CNY and the exchange rates.
Yes, that’s plural. China has two currencies. Knowing the differences between them can be a valuable asset when transferring funds internationally.
If your business requires trade with China, learn the specifics of the country’s currencies by understanding the RMB, yuan and CNH vs CNY.
A quick look at the Chinese RMB
So, what’s the RMB?
“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” in Mandarin. The abbreviation for renminbi is RMB, and RMB is typically the preferred term when talking about Chinese currencies in financial circles.
While renminbi is the currency’s official name, the yuan is the unit of currency. Think of it like this: in England, the currency is officially called pound sterling, but the unit of currency is called a pound.
The symbol for yuan is ¥ (the 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
There are two types of RMB, each covering a different major trading market:
CNY is RMB that’s traded in mainland China.
CNH is RMB that’s traded offshore from mainland China, such as in Hong Kong.
The difference between CNY vs CNH depends on the location of the transaction.
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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