6 In 2009, the Chinese government began an experimental program where some transactions between businesses in the Guangdong and Shanghai provinces and, with other counterparties located in Hong Kong, Macau and a few other select Asian countries were allowed to be settled directly, circumventing the People’s Bank of China. 5 Foreign companies doing business in China can accept CNY for payment, and then exchange it in Hong Kong at the CNH rate, which is usually more favourable. dollar reserves, while supporting trade between Chinese companies or the Chinese government and foreign companies. When it is traded outside mainland China, for example in Hong Kong, the currency identifier is 'CNH.' The set-up enables China to maintain greater control of its domestic currency and protect its U.S. When renminbi is traded in mainland China, for example in Shanghai, the currency identifier is 'CNY' (for Chinese yuan). dollar, Japanese yen and euro.īut because of the onshore/offshore split, the renminbi is unique in that it has two fundamental trading markets. 4 There it joins the British pound sterling, U.S. 3 Though some argue the currency has devalued slightly, the Chinese government’s diligence at keeping its exchange rate stable, along with its increased popularity have led to the inclusion of the renminbi in the International Monetary Fund’s (IMF) 2016 basket of world currencies. 2 Second, in December 2015 China changed its “peg” for the onshore (domestic) version of the renminbi to a basket of many currencies, not only the U.S. First, the renminbi has been split into “onshore” and “offshore” versions that are essentially the same with the following exception: the onshore version continues to trade within a narrow (2 percent) band around a midpoint set by China’s government, while the offshore version is allowed to float more freely – meaning its exchange rate can vary more widely. Since 2006, however, a couple of things have changed.

This meant that the Chinese government had tightly controlled the supply of the currency, in order to keep its foreign exchange rate very closely aligned to a fixed exchange rate with the U.S.

1 Until 2005, the renminbi had long had its value pegged to the U.S. Basically, the renminbi is the official currency of the People’s Republic of China ('renminbi' translates to 'people’s currency'), while the yuan is a unit of that currency. There is often confusion around the difference between the renminbi (RMB) and the yuan.

Chinese currency exchange rates