CNH is an acronym that stands for "Chinese yuan offshore," also known as "offshore yuan" or "CNH." CNH refers to the Chinese currency, yuan, that is traded and settled outside of mainland China. Unlike its counterpart, the "onshore yuan" (CNY), which is the currency used within mainland China, CNH is the circulating form of the yuan that is traded offshore.
CNH arose due to regulatory restrictions imposed by the People's Bank of China (PBOC) on the convertibility of the yuan. The PBOC implemented these capital controls to manage the outflow of funds, control exchange rates, and maintain stability within the domestic economy.
As a result, CNH emerged as an alternative to facilitate yuan-denominated transactions in regions outside of mainland China, predominantly in Hong Kong but also in international financial centers such as London and Singapore. CNH allows investors, businesses, and individuals to hold and trade the yuan in offshore markets, thereby enabling international trade and investment activities to be conducted in this currency.
CNH is freely convertible with other foreign currencies, making it potently attractive for international trade settlements and cross-border transactions. It is worth noting that though CNH trades independently of CNY, the two share a close relationship. The exchange rates between CNH and CNY are not entirely fixed, and they may experience some degree of divergence due to market factors and the influence of supply and demand forces.
