Hedging the yuan: CNY, CNH, the daily fixing and what a forward costs
The yuan trades on two markets, under two codes: CNY in mainland China, CNH offshore. For a French company, it is almost always the latter that is used for hedging. How the Chinese central bank's fixing works, what a forward costs, and the dollar exposure that often hides behind a purchase in China.
China is a leading supplier for many French companies, and the BIS notes growth in renminbi trading in its 2025 survey. The yuan — or renminbi — nonetheless has a feature no other major currency shares: it trades on two separate markets, which do not follow exactly the same rules.
Two markets, two codes
| CNY | CNH | |
|---|---|---|
| Where | Mainland China | Offshore, mainly in Hong Kong |
| Framework | Daily central bank fixing; movement limited to ±2% around that rate against the dollar, since March 2014 | Free rate, no fluctuation band |
| Use for a French company | Hard to access directly | This is where most hedges are traded |
Every morning, the People's Bank of China publishes a central rate against the dollar, and the onshore yuan cannot move more than 2% from it during the day. This band, widened from 1% to 2% on 17 March 2014, frames CNY; CNH moves freely, but in practice stays close to CNY.
The actual range over five years
As with sterling, the five-year comparison hides the essential: EUR/CNY ended close to its starting point, after a 25% gap between its extremes. With the yuan managed against the dollar, its moves against the euro largely follow those of EUR/USD.
What a forward costs today
With yuan rates below euro rates, the EUR/CNH forward trades below spot: the importer buying yuan forward pays the gap.
| As of 16 October 2026 | Value |
|---|---|
| Gap between one-year forward and spot, EUR/CNH | −1.51% (7.5139 spot, 7.4007 one year) |
| Exporter: EUR 1,000,000 receivable in CNH, hedged one year ahead | about EUR 1,015,300, i.e. 1.5% more than at spot |
| Who the forward favours | The exporter selling yuan; the importer pays about 1.5% a year |
The dollar hidden behind a purchase in China
Some Chinese suppliers invoice in dollars rather than yuan. In that case, the French company's exposure is not to the yuan but to the dollar — and it is EUR/USD that must be hedged. When the supplier agrees to be paid in yuan, the company avoids a double conversion, but must then hedge a currency somewhat less liquid than the dollar.
Before choosing the payment currency, compare both options at full cost: the supplier's price in each currency, the conversion cost, the forward cost. The cheapest currency to hedge is not always the one with the best purchase price.
Pitfalls specific to the yuan
- 1Confusing CNY and CNH
A contract hedged in CNH for an invoice settled in CNY carries a small risk of a gap between the two rates. You need to know which yuan the supplier is paid in.
- 2Ignoring liquidity
The CNH market is deep, but less so than the dollar's: spreads are wider, especially on long maturities and options.
- 3Forgetting the dollar management
The yuan is managed against the dollar. An EUR/CNH hedge therefore covers, in practice, a large share of EUR/USD risk.
Sources
- European Central Bank, euro reference exchange rates (EXR series), from 15 October 2021 to 16 October 2026; extremes calculated by ELEGG.
- People's Bank of China, widening of the yuan's trading band against the dollar from 1% to 2% around the central rate, effective 17 March 2014 (reported by CNBC, 15 March 2014).
- Forward points and spot rates captured by ELEGG Finance on 16 October 2026 at 22:17 UTC (source: NetDania), mid rates between bid and offer; ELEGG calculation.
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Frequently asked questions
The questions finance departments ask most often on this topic
What is the difference between CNY and CNH?
CNY is the yuan traded in mainland China, framed by a daily central rate from the central bank and a ±2% band against the dollar. CNH is the yuan traded offshore, mainly in Hong Kong, with no fluctuation band. Foreign companies' hedges are mostly done in CNH.
How much does a yuan forward hedge cost?
On 16 October 2026, the one-year EUR/CNH forward traded about 1.51% below spot. An importer buying yuan forward therefore pays about 1.5% more than at spot.
Should I pay my Chinese supplier in yuan or in dollars?
It depends on the full cost: price offered in each currency, conversion cost and hedging cost. Paying in dollars exposes the company to EUR/USD; paying in yuan avoids a double conversion but requires hedging a somewhat less liquid currency.
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