As global equity investors, we are constantly faced with currency changes. This is an important factor when considering our investments, because currency movements impact companies’ earnings and operations. Of course, there are winners and losers with currency ups and downs. Export-driven companies can thrive with weaker national currencies, while domestic-driven industries are more likely to suffer. As one of the world’s global export powers, China has kept tight controls on its currency in order to enhance its investment and trade position, but those controls are starting to loosen.

Names and Places

Currency dynamics can be confusing, and there is a lot of confusion just in the differences in the Chinese currency names of RMB, CNY and CNH. To clarify, the People’s Republic of China dubbed its official currency the “Renminbi” in 1949.”Yuan” is the name of a unit of the Renminbi currency and is called one of two things depending on whether there is onshore or offshore use: CNY is in reference to RMB onshore in China (hence the “Y”), whereas CNH refers to RMB outside the China market offshore, primarily in Hong Kong (hence the “H”). Due to the effective segregation of the onshore/offshore RMB markets, CNY and CNH can often be subject to different demand and supply factors.