Sourcing in China – when to use CNY – if ever?

[Anders P. Nielsen]

Earlier payment for foreign companies’ sourcing in China was always settled in (the old) hard currencies USD or EUR. With the liberalizations and new payment opportunities in RMB it is now possible to pay in both offshore CNH and in onshore CNY – of course provided that your Chinese supplier agrees and you meet documentation requirements, have the necessary permissions, infrastructure etc. in place.

My question is simply when to use the onshore (CNY) currency opposed to the offshore version or maybe that is not relevant at all for foreign companies?

Can anyone please enlighten me?

Thanks.

[Asterix]

I concur that there is a trend to trade more in CNH and CNY. I have talked to both exporters and importers from Western Europe who are reviewing this at present.

My personal take is that one should be very aware of the exchange rates at any time. This to limit the likelihood of major FX gains for the trading partners in question. Another take is that a given central treasury function can consider centralising FX risk by trading with subsidiaries in China in local currency.

Best Regards,