Payments to China

Cross Border Payments & China

What is the Difference between CNH and CNY?

China has two currencies that are both in use – CNH and CNY. Both of these currencies are regulated by the People’s Bank of China, however, there are some key differences between them that you should be aware of before sending money to China.

Currency Dichotomy

The official currency of China is the Renminbi (RMB), and its primary unit is the yuan (CNY). The terms “Renminbi” and “yuan” are often used interchangeably, with yuan referring to the unit of the currency. One yuan is equivalent to 10 jiao (dime) or 100 fen (cents). Adding to the complexity, there are two distinct yuans. When engaging in business with China, it is crucial to clarify which yuan is being referred to to avoid any confusion.

CNY: This refers to the “onshore” yuan, traded exclusively within mainland China and subject to strict oversight by the People’s Bank of China (PBOC). The PBOC establishes a daily reference rate for the CNY, permitting it to fluctuate within a 2% range.

CNH: This denotes the “offshore” yuan, traded beyond mainland China, predominantly in Hong Kong. The CNH operates with a different regulatory framework than the CNY, affording it greater susceptibility to market forces.

The People’s Bank of China (PBOC) serves as the primary authority overseeing China’s monetary policy, encompassing the regulation of the money supply and the establishment of interest rates. In July 2009, Chinese authorities removed restrictions on the use of the Renminbi for trade settlements between China and Hong Kong. This pivotal decision enabled businesses to conduct transactions in RMB beyond Mainland China for the first time.This development gave rise to offshore RMB markets, particularly in Hong Kong, where the offshore Renminbi is denoted as CNH. The intentional separation of the two currencies, CNY (domestic) and CNH (offshore), ensures that domestic currency remains unaffected by international forex market fluctuations.

The establishment of offshore markets contributes to currency stability for various purposes, including investments. Transactions involving the currency can be facilitated through banks in Hong Kong, providing a reliable avenue for currency trade.

Chinese Capital Controls

China has long embraced a concern that a significant influx of money into the country may lead to potential issues, such as inflation. When a country experiences an excess of incoming funds, its currency can appreciate, resulting in more expensive exports and a risk of inflation.

To mitigate these risks, China enforces stringent regulations on the outflow of money from the country, known as capital controls. The State Administration of Foreign Exchange (SAFE), operating under the People’s Bank of China (PBOC), plays a crucial role in this context. SAFE is tasked with formulating policies and regulations, as well as overseeing and supervising foreign exchange transactions.

In essence, SAFE possesses the authority to implement measures that either loosen or tighten regulatory controls concerning foreign exchange transactions. These controls extend to both current account transactions, such as the import/export of goods and services, and capital account cross-border transactions, including equity investment and debt financing.

In accordance with regulations set by the SAFE, foreign-invested enterprises (FIEs) that are incorporated must adhere to the standard debt-to-equity ratio stipulation. This implies that a specific percentage of the total investment in an FIE must consist of capital contributed by the investors. Should the foreign-invested enterprise (FIE) fail to adhere to the regulations outlined by the State Administration of Foreign Exchange (SAFE), the foreign exchange bureaus have the authority to assume control over the capital account information. Consequently, banks will decline to conduct any foreign exchange transactions under the FIE’s capital account. Additionally, if the FIE does not meet SAFE’s specified conditions, banks will prohibit the distribution of profits to foreign shareholders by the FIE.


For cross-border payments – especially in the context of businesses with a footprint in China, the CNH is superior.

As the CNH operates under a less stringent regulatory framework compared to the CNY, businesses can implement strategies more effectively to shield themselves from unfavorable currency movements. This allows for greater predictability in financial outcomes and a reduction in unforeseen losses arising from currency fluctuations. Along those lines, since the CNH market functions beyond mainland China, it provides foreign companies with increased flexibility in handling their currency transactions. This includes simplified repatriation of funds and the opportunity to participate in a wider range of financial activities.

Chinese Payment Rails

Most mainland Chinese companies establish offices in Hong Kong for the convenience it offers in trading with the West. This is facilitated by the absence of restrictions on the amount of CNH they can send internationally. But, how can non-Chinese firms transfer money to China given it stringent reporting requirements and currency controls?

In 2015, China’s central banking system introduced the Cross-Border Inter-Bank Payments System (CIPS), an international payment system. CIPS is designed to offer clearing and settlement services for cross-border renminbi (RMB/Yuan) transactions. As of January 2021, the use of CIPS became compulsory for cross-border CNY transactions.

A bank that is a member of CIPS is able to convert CNH to CNY on a 1:1 basis. Non-CIPS members will impose extra costs through transaction fees and the 2% variance applied to mainland China trades.

Thus, the solution is to identify a payment institution or electronic money institution that offers multi-currency accounts and is partnered with a CIPS member bank. Examples of these financial institutions include MultiPass and CurrencyCloud.


With the increasing adoption of RMB in the global economy, the need for seamless FX transaction in and out of China has become increasingly necessary.

Adam Tracy offers comprehensive payments architecture consulting, including businesses with Chinese footprints. Be sure to reach out should you have any questions.

Otherwise, you can book a meeting here.

About Adam Tracy

Adam Tracy is a payments expert and entrepreneur who specializes in payment systems, blockchain technology, digital currencies, and other emerging technologies. He is the founder of Blockrunner, LLC that provides consulting services to clients in the blockchain, payments and cryptocurrency arenas.

Tracy has been involved in the payments industry as an attorney, consultant and entrepreneur since 2005, while he was become an expert in blockchain and cryptocurrency since its advent in 2013. Tracy has worked with a wide range of clients, including startups, established businesses, and investor – both in the United States and worldwide. He has advised clients on a wide range of compliance, legal and operational issues related to payment transfer systems, crypto token generation and architecture, cryptocurrency exchanges, regulatory licensing, smart contracts, and other blockchain applications.

In addition to his consulting work, Tracy has founded several companies in the payments, blockchain and cryptocurrency space, including a digital asset hedge fund, licensed electronic money institution and a blockchain-based tokenization platform. He is also a proponent of decentralized finance (DeFi) and has been involved in various DeFi projects.

Tracy is also a frequent speaker and writer on blockchain and cryptocurrency topics. He has been featured in a wide range of publications, including Forbes, Hollywood Reporters, CNBC, Reuters, CoinDesk, and

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