CNH vs. CNY: the differences in Chinese Renminbi
China is the largest retail market in the world. As such, breaking into this market can be a significant opportunity for US eCommerce businesses.
But while selling in any foreign country can present challenges, selling in China may be especially confusing at first due to their currency. Essentially, while China has one official currency — the Renminbi — it is divided into two subtypes of currency. To make things worse, both of these subtypes are known as “yuan.”
This discrepancy often comes as a surprise to US businesses who are interacting with China for the first time. The obvious question is: Which currency is best for my business?
Let’s take a look at each of these currencies, their associated terms, and what they actually mean to answer this question.
An introduction to Chinese Renminbi
Renminbi (RMB) 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 typically the term you’ll hear most when discussing 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 the US, the official currency is the US Dollar, but we just say “dollar” to refer to the unit of currency. While we use the dollar sign ($) to refer to dollars, the symbol for yuan is ¥ (the same as the Japanese Yen).
Pretty simple, right? But don’t get too comfortable — you still need to understand the difference between the two types of yuan: CNY and CNH.
CNH vs. CNY
There are two types of Renminbi, each of which applies to a different major trading market:
CNY is Renminbi that’s traded on mainland China.
CNH is Renminbi that’s traded offshore from mainland China, such as in Hong Kong.
What’s the difference between CNY and CNH?
Both CNY and CNH are used in China. And both are worth the same amount of Renminbi. Nevertheless, they’re technically different currencies.
CNY and CNH have different exchange rates and, as such, are worth different amounts — but not against each other.
In China, you’ll simply use Chinese Renminbi. CNY and CNH are the same Renminbi in this case and have a 1:1 exchange rate.
Differences in exchange rates only become apparent when the RMB is subject to external factors.
Why are CNY and CNH different?
CNY is government-regulated in an effort to facilitate control of China’s domestic currency and encourage trade between Chinese companies.
Foreign businesses who trade within mainland China can still accept CNY as payment. However, 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 according to the will of the free market. The free market determines its value, while still ensuring that China’s internal Renminbi remains strong.
Is RMB the same as CNY?
RMB and CNY are essentially the same thing.
For example, imagine you go out to a cafe in the United States. You buy a latte that costs $5.50, hand over $6 in cash, and get 50 cents in change. You’re giving and receiving dollars and cents — but it’s all still the US Dollar.
The relationship between RMB and yuan is the same. Chinese Renminbi is the official currency, while yuan is the name of a unit of Chinese Renminbi currency.
Which currency should US businesses use to send money to China?
US businesses who want to send money to China should be aware of which currency they’re dealing with.
You already know that you’re operating in RMB. And you’re certainly welcome to send money in CNY if you choose. But if you receive money from a Chinese business, it’s likely to be in CNH. As such, you should be aware that you may see an exchange difference in your transactions.
You should also be aware of restrictions and requirements for international money transfers in order to ensure a smooth transaction. For example, the Chinese State Administration of Foreign Exchange requires order information on CNY inbound transactions to prove the source of the funds. Banks will need to provide this information.
Airwallex Global Business Accounts: a better banking alternative
Airwallex is making financial transactions with China easier with our Global Business Account. This account gives you all the typical advantages of a digital business account, but with added benefits and features that are built for a global scale.
Set up a foreign currency account in seconds and start sending and receiving money right away. Easily send and receive CNY or hold it safely in your Virtual Wallet to hedge against currency fluctuations, which can eat into your profit margins.
You can also empower your team to streamline your business in China — and around the world — with our multicurrency virtual payment cards.
Plus, when you send CNY to recipients in China, you’ll get access to our interbank exchange rate. We only charge a simple 0.3% fee — much better than what any big bank can offer.
Syncing directly to Xero, each of your CNY transactions are logged automatically to your CNY account. This makes it easy to keep track of all your transactions wherever you go.
Watch a demo of our Global Accounts or sign up today to see how Airwallex can alleviate the CNY vs. CNH headache.
Related article: How to manage foreign exchange risk for your business
Evan Dunn manages the growth of Airwallex's SMB business in the US through marketing avenues. Evan is a generalist with expertise in SEO, paid media, content marketing, performance marketing and social selling. He also enjoys slam poetry and waffle making.
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