At a Glance: Why USD/RMB Means Two Different Things Depending on Where You Trade
Ever tried wiring money from the US to China or checked the USD/RMB exchange rates and noticed two different numbers? It's not a glitch. China’s currency, the Renminbi (RMB), plays a double role in global finance: there’s the onshore CNY and the offshore CNH. This split can trip up even experienced traders and corporate treasurers. In this article, I’ll share the lessons I learned navigating CNY and CNH, what the real-world impact looks like, and how even the pros sometimes get it wrong—plus, you’ll get practical screenshots and tips for handling cross-border payments.
My First Encounter: Two RMBs?
A few years back, I was helping a client in Hong Kong settle an invoice with a factory in Shenzhen. We pulled up the USD/RMB rate on Bloomberg—it was 6.72. The bank quoted us 6.78. But the supplier insisted on 6.65. We were all looking at what we thought was the same currency, yet none of the numbers matched. Turns out, I had stumbled smack into the CNY/CNH divide. If you haven’t run into it before, here’s the story.
What’s the Difference: CNY vs CNH Explained
In the simplest terms: CNY is the RMB traded within Mainland China ("onshore"), and CNH is the RMB traded outside Mainland China ("offshore"), mainly in places like Hong Kong, London, and Singapore.
- CNY (Onshore RMB): Strictly regulated by the People’s Bank of China (PBOC). All trades must comply with Chinese capital controls. The exchange rate is managed daily via the “central parity rate” system. You’ll see this used for domestic transactions, payroll, and local investments.
- CNH (Offshore RMB): Developed as part of China’s push to internationalize its currency. It trades in open markets—meaning the rate can (and often does) diverge from the onshore CNY. There are fewer restrictions on movement and conversion, so it’s the version used in global finance, international trade settlements, and offshore bond issuances ("dim sum bonds").
How Does This Affect USD/RMB Trading?
This dual-track system creates two official exchange rates: USD/CNY and USD/CNH. Depending on where you’re transacting (in China or overseas), the rate can differ by dozens, even hundreds, of pips. For example, during the 2015 RMB devaluation, the spread between USD/CNY and USD/CNH widened to over 1%—costing some companies millions.
Here’s a screenshot from Reuters showing the spread between the two rates in July 2023:
That spread can have real consequences. In my case, our client ended up paying about $500 more on a $10,000 invoice just because their Hong Kong bank used CNH, while the factory settled in CNY.
Regulatory Background and Practical Rules
The reason for this split is rooted in Chinese financial regulation. According to PBOC regulations (People’s Bank of China, official site), all onshore RMB transactions must go through the China Foreign Exchange Trade System (CFETS) and stay within daily trading bands set by the central bank (IMF, 2023). Offshore RMB, however, is governed by the financial authorities of the jurisdiction where it’s traded (e.g., Hong Kong Monetary Authority).
Official Documents and Links:
- PBOC CNY management: http://www.pbc.gov.cn/
- IMF review on RMB internationalization: IMF Working Paper
- Hong Kong Monetary Authority CNH guidelines: https://www.hkma.gov.hk/eng/
A Real-Life Mix-Up: Payment Gone Wrong
Let me illustrate with a (slightly embarrassing) story from last year. A friend’s trading company in Singapore made a payment to a supplier in Guangzhou. The Singapore bank sent CNH, expecting it would be equivalent. The supplier’s bank in China, however, required CNY for settlement. There was a two-day delay while the banks converted CNH to CNY, and the exchange rate had moved—costing my friend a few hundred dollars and a lot of nerves.
What’s the lesson? Always confirm upfront which RMB your counterparty expects, and check your bank’s default settlement currency. Some banks (like HSBC or Standard Chartered) now ask clients explicitly, but others don’t.
Expert View: Why Two RMBs Might Never Merge
I once asked a senior FX trader at a major European bank (let’s call her Lisa) whether this split would ever disappear. Her take: "As long as China maintains capital controls and the PBOC sets trading bands, there will always be a spread. The offshore market is a pressure valve for global demand, but it’s not a free-floating currency." That echoes the Bank for International Settlements 2017 study, which found persistent volatility in the CNY/CNH spread during periods of economic stress.
What About “Verified Trade” Standards? A Table of Global Differences
Since cross-border RMB trade often hinges on regulatory certification, here’s a quick comparison of “verified trade” standards between major economies:
| Country/Region | Standard Name | Legal Basis | Enforcement Agency |
|---|---|---|---|
| China | Customs Declaration Verification | Customs Law of the PRC | General Administration of Customs (GACC) |
| EU | Authorized Economic Operator (AEO) | Union Customs Code (UCC) | European Commission, National Customs |
| USA | Customs-Trade Partnership Against Terrorism (C-TPAT) | Trade Act of 2002 | U.S. Customs and Border Protection (CBP) |
| Japan | AEO Certification | Customs Business Act | Japan Customs |
See WTO’s Trade Facilitation Agreement for global customs best practices.
Practical Workflow: How to Check and Trade CNY/CNH
Here’s how I now handle RMB cross-border transactions, with a few missteps along the way:
- Identify Currency Codes: Always ask your counterparty if they want CNY or CNH. Some invoices just say “RMB” but don’t specify which.
- Check Bank Settlement Options: Log into your online banking. For example, on HSBC HK, there’s a dropdown for “Remit in CNH or CNY” (see below). If unsure, call your RM—the last time I didn’t, my payment was delayed by two days.
- Monitor the Spread: Use Bloomberg, Reuters or XE to check the real-time USD/CNY and USD/CNH rates before you book the trade. The spread can widen during volatility.
- Document Everything: For cross-border trades, customs often require proof of transaction and compliance with “verified trade” standards (see table above). Make sure you have all invoices and customs declarations in order.
Screenshot from HSBC Hong Kong wire transfer screen (mocked for privacy):
I once selected the wrong option, ended up with my transfer stuck in limbo, and had to spend an hour on the phone with support. Lesson learned: double check!
Industry Expert’s Perspective
As Dr. Zhang Wei, former chief economist at the Bank of China, put it in a recent Caixin interview (2023): “For businesses, understanding the operational difference between onshore and offshore RMB is not just technical—it’s essential risk management. A misstep could cost more than the underlying trade margin.”
Final Thoughts: Don’t Get Caught Out by the Two RMBs
If you’re dealing with China, you’re dealing with two currencies, even if they look identical. The split between CNY and CNH isn’t just a quirk—it’s a deliberate part of China’s financial architecture. In my own experience, taking an extra five minutes to clarify the currency and rate has saved me time, money, and embarrassment. As China’s reforms evolve, the gap may narrow or widen, but for now: always check twice, ask questions, and don’t assume.
For those handling larger trade flows or managing corporate treasury, it’s worth reviewing your internal procedures and talking to your bank about multi-currency settlement options. And if you’re curious about the technical side, the BIS report and IMF working papers provide in-depth analysis.
Next Steps:
- Review your cross-border payment settings for CNY/CNH options
- Bookmark real-time rate trackers for CNY and CNH
- Train your finance team on “verified trade” documentation requirements
If you’ve got a story about a CNY/CNH mix-up (or a clever way to hedge the spread), let’s connect—I promise you’re not alone.