Offshore RMB (CNH) is a transitional institutional arrangement before RMB is convertible under capital account. The Capital Account is for the CurrentAccount. Both are the subjects that measure international balance of payments when national economic accounting. Current account mainly includes goods and services trade balance, labor service balance and unilateral transfer. Capital account refers to the increase and decrease of foreign exchange assets and liabilities resulting from the input and output of capital, including direct investment, all kinds of loans and securities investment.
Generally speaking, RMB in mainland China is CNY, while RMB outside mainland China is CNH, where H stands for Hong Kong, because Hong Kong is the first overseas RMB clearing center recognized by the People’s Bank of China and also the first market offering USD/CNH quotation.
As of July 2021, the top three RMB offshore centers are Hong Kong, the United Kingdom and Singapore. According to the offshore Yuan Index for the end of 2020 released by the Bank of China, RMB deposits held by non-residents were about 1.99 trillion yuan at the end of the fourth quarter of 2020. In addition, according to data from the People’s Bank of China, the outstanding balance of yuan deposits in China was 212.57 trillion yuan at the end of 2020. Stocks of CNY and CNH are currently not of the same order of magnitude.
The development history of CNH
2004-2009 CNH Preparation stage: From 2004, Hong Kong banking institutions can provide RMB business for individuals, including deposit and loan, credit card and other businesses.
On January 20, 2009, the People’s Bank of China and the Hong Kong Monetary Authority signed a RMB 200 billion currency swap agreement. This is also the beginning of the internationalization of the renminbi.
On June 29, 2009, Hong Kong and the Mainland signed a memorandum of understanding on cross-border trade RMB settlement business, and designated Hong Kong as the first offshore RMB clearing center under the “Measures for pilot Administration of Cross-border Trade RMB Settlement”.
August 23, 2010: USD/CNH quotation was officially launched in the interbank quotation trading system together with USD/CNY, marking the beginning of the offshore RMB foreign exchange market.
Since 2010, the offshore yuan has gradually grown.
Tips: Concerns about the new strain continue to ease, European and American stock markets, commodities and currencies soared, oil prices once soared 5 percent. For specific operation, please pay attention to the reelfinancial.com. The market is changing rapidly, so investment should be cautious. The operation strategy is for reference only.