CNH vs CNY: The Differences in Chinese Renminbi
Mainland China has one of the world’s largest retail markets. It is expected to reach 50 trillion yuan in retail sales by 2025. Breaking into that market can open up many opportunities for Hong Kong businesses that are looking to reach new customers.
This prospect is especially promising for eCommerce businesses. Last year, it was forecasted that China will become the first country where online transactions make up over 50% of its total retail sales. With online shopping on the rise, eCommerce businesses can take advantage of the increasing consumer demand to drive their growth.
If you already have your eyes set on the mainland Chinese market, and have started your research on conducting business there, you may have noticed that they have a currency system different from most countries. China has one official currency, the Renminbi (RMB) — but this is divided into two types of currency, which are CNH and CNY. 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 RMB
So what’s RMB? Renminbi is the official name of the currency of the People’s Republic of China — much like the US Dollar, Pound Sterling, or Australian Dollar. Renminbi translates to ‘people’s money’. It is the preferred term when talking about Chinese currency in financial circles.
While RMB 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 RMB, each one covering a different major trading market:
CNY is RMB that’s traded on mainland China
CNH is RMB that’s traded offshore from mainland China, such as in Hong Kong
What are the differences between CNY and CNH?
Although both CNY and CNH are types of currencies for the same country, and both worth the same amount of RMB — they’re not technically the same currency. Both of these currencies have different exchange rates when compared to another foreign currency like the Hong Kong Dollar and hence are traded at different amounts.
Given their difference in exchange rates, they are worth different amounts — but not against each other.
In China, you’re simply dealing with Chinese RMB. It’s all the same RMB, 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 controlled and regulated by the Chinese government and there are restrictions in place for its currency trading. It is the currency used within China and empowers trade between Chinese companies.
For overseas companies, they can still accept CNY as their payment while dealing with Chinese businesses. However, if they want to use Renminbi outside of China, they have to exchange CNY to CNH.
CNH, on the other hand, is designed as an offshore version of RMB. This way RMB 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 RMB remains strong.
So, is RMB the same as CNY?
RMB and CNY are essentially the same thing.
Here’s another way of thinking about it. Say you went out to a bar in Hong Kong and bought a drink that cost HK$90.5. You paid HK$91 in cash and got 50 cents in change. You’re giving and receiving dollars and cents — but it’s all still in Hong Kong 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
If the conversion between CNH and CNY sounds like a lot of work to you, Airwallex offers a much easier and straightforward solution to handle your transactions in and out of China.
Our Global Business Account offers all the perks of a digital business account, plus the added advantages and special features that will give your business a competitive edge when trading overseas.
Set up a Foreign Currency Account in seconds and start making transactions right away. Your Global Account allows you to send and receive CNY.
When you send CNY to your Chinese business contacts, you’re able to access our market-beating exchange rates — 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 started with Airwallex today to ease your expansion into the mainland Chinese market or streamline your vendor payment process to Chinese suppliers! Book a demo with a product specialist to discuss how our Global Business Account can take the headache out of CNY vs CNH.
Release Notes: March 2022