What is “offshore RMB” ?

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Since the start of the RMB cross-border settlement in Jul-2009,the deregulation of the RMB has been gradually carried out step by step by the China government. As a result, the offshore RMB market was established. This section mainly introduces basic knowledge about the offshore RMB.

Image of the development of RMB cross-border settlement

  1. Before 2009/Jul
  2. Before 2009/Jul
  3. Before 2009/Jul

Two RMB markets

The RMB had been used and settled only in Mainland China (onshore RMB market) until 2009. Since the start of the RMB cross-border settlement, the offshore RMB market was born and developed gradually. Currently the onshore RMB market and offshore RMB market co-exist.

Launch of the offshore RMB market

Following the start of the RMB cross-border settlement, PBOC (People's Bank of China) and HKMA (Hong Kong Monetary Authority) made an agreement in Jul-2010, referring to the RMB banking service in Hong Kong. The offshore RMB market was finally open for action.

The correlation between the onshore RMB market and
Offshoure RMB market

Offshore financial institutions can’t access the onshore RMB market except in some limited cases, while onshore financial institutions basically can’t access the offshore RMB market. That is why rates (foreign exchange, money,etc.) are normally different in the onshore RMB market and offshore RMB market (based on the difference of market

The correlation between the regulations in the Mainland and offshore RMB market

The transactions (forex, money, etc.) in the offshore RMB market aren’t principally targeted by the regulations launched in the Mainland. However the new regulations and the change of regulations may affect the movement of the rates in the offshore RMB market.

Descriptions of RMB

Generally, the market participants call the RMB transaction in Mainland China “CNY”, while they call the one in out-of-Mainland China “CNH”. However, on the global settlement system, “CNY” is only used as the currency code.

Direct foreign exchange with RMB

Based upon agreement of two governments,direct foreign exchange between home currency and RMB has been started in several regions (Japan, Malaysia, Russia etc.).

China (Shanghai) Pilot Free-Trade Zone

China (Shanghai) Pilot Free-Trade Zone was established on September 29, 2013, in an attempt to test the economic reforms that had never been seen before in Mainland China.

Launch of the money reference rate for offshore RMB

CNH has been added to HIBOR*1 as the money reference rate for the offshore RMB since Jun-2013. The new benchmark has made the offshore RMB money market much more transparent and, has accelerated the offshore derivative market (Interest Rate Swap etc.).
*1 Hong Kong Interbank Offered Rate

(as of Feb-2014)

Dim Sum Bond

“Dim Sum Bond” is the offshore RMB-denominated bond, which is issued and circulated elsewhere than in the Mainland China (mainly in Hong Kong).
Companies (including financial institutions) in the Mainland China must acquire an approval from the Chinese Authority for an issue of “Dim Sum Bond”.
On the other hand, companies outside Mainland China can issue “Dim Sum Bond” without any authorization by the Chinese Authority. However, their transfer and use of the fund in the Mainland China require an approval from Chinese Authority.