Onshore exchange rate (CNY), also known as domestic RMB exchange rate, refers to the exchange rate between RMB and foreign currency traded in Chinese mainland (i.e. "onshore") market. The onshore exchange rate is managed by China Foreign Exchange Trading Center (CFETS), and the exchange rate fluctuation is mainly influenced by the policies of the People's Bank of China. The onshore market is mainly for domestic investors and companies, with strict transactions and relatively small exchange rate fluctuations.
Offshore exchange rate (CNH), also known as offshore RMB exchange rate, refers to the exchange rate between RMB and foreign currency traded in markets outside Chinese mainland (namely "offshore"). The offshore exchange rate is not directly controlled by the central bank, but mainly affected by the relationship between market supply and demand. The offshore market is open to international investors and companies, with relatively free transactions and large exchange rate fluctuations.
There is a certain difference between onshore exchange rate and offshore exchange rate, which reflects the difference between the two exchange rates and the demand for RMB in the international market. Generally speaking, the onshore exchange rate is more stable, and the offshore exchange rate is more affected by the international market and fluctuates more.
Understanding the difference between onshore exchange rate and offshore exchange rate is very important for import and export enterprises, international investors and foreign exchange traders. Because exchange rate fluctuations will affect the profits, investment returns and foreign exchange risks of enterprises. Therefore, in cross-border trade and investment, it is necessary to pay close attention to the changes of onshore and offshore exchange rates to reduce exchange rate risks.