Offshore vs Onshore Yuan: Why Traders Care About CNH and CNY

If you’ve noticed USD/CNH and USD/CNY charts move differently, you’re not seeing things. Here’s what’s actually happening.

Two Yuan, One Currency, Completely Different Markets

China’s capital controls mean the Yuan has a split personality. CNY is the onshore version—traded in Mainland China under Beijing’s watchful eye. CNH is its offshore twin, traded in Hong Kong, Singapore, London and other external hubs, with way less regulation.

Think of it like this: CNY is the tame version. CNH is the wild version.

The Evolution: From Chaos to Control to Controlled-But-Freer

Before 1994, China had a dual exchange rate system that was a complete mess—the official rate (5.8 USD/CNY) was nowhere near the black market rate (8.7). They unified it in 1994 and started building a real FX system.

Then came the big moment: July 2005. China’s central bank stopped pegging the Yuan purely to the US dollar and switched to a basket-of-currencies approach. The Yuan strengthened 2.1% in one day. Game changer.

But when the global financial crisis hit in 2008? Beijing panicked and re-pegged the Yuan to the dollar to protect exports. After things stabilized, they gradually loosened the leash again. By 2014, they’d expanded the daily trading band to 2%.

The offshore CNH market started much later—2010. Hong Kong launched formal Yuan trading in August that year, creating the first liquid market for Yuan outside China.

Why CNH Moves More Than CNY (And Why Traders Notice)

Here’s the key difference: CNH is less controlled, so it’s more volatile.

When the same news hits—say, a trade war or rate cut—CNH reacts harder and faster. It’s market-driven rather than managed. During the 2018 US-China trade tensions, USD/CNH surged from 6.2358 to 6.9587, while USD/CNY only went from 6.2419 to 6.9347. Same event, different moves.

For speculators? CNH is more interesting. More volatility = more trading opportunities (and more risk).

The Spread Tells a Story About Policy

Historically, CNH trades slightly weaker than CNY. But when the gap widens, it usually signals one thing: China’s fighting Yuan weakness.

When shorts pile up and the Yuan tanks, Beijing’s central bank (PBOC) steps in with moves like adjusting the daily reference rate. But here’s the timing problem: these tools hit the onshore CNY market first, then take time to ripple into offshore CNH. Result? The spread blows out.

Watch the CNH/CNY spread if you want to read Beijing’s playbook. A widening gap = the regime is nervous about capital flight.

The Takeaway

CNY and CNH are the same currency in two completely different ecosystems. CNY is managed. CNH is market-driven. If you’re trading Yuan, knowing which one you’re in matters.