CNH (Offshore Renminbi) Global Development Report 1、 CNH Overview CNH is the "offshore version" of the Chinese yuan, which originated in Hong Kong in 2004. It is a trading form of the Chinese yuan in overseas markets, and the exchange rate of CNH is determined by market supply and demand. It differs from the domestic Chinese yuan (CNY) in terms of exchange rate mechanism, regulatory framework, and trading freedom. 2、 Main milestones in the development process In 2004, Hong Kong opened RMB personal business and banks began to accept RMB deposits. In 2009, China launched a pilot program for cross-border trade settlement in RMB, initiating the "RMB Going Global" initiative. In 2010, the CNH market was officially formed, and Hong Kong launched the RMB foreign exchange market (USD/CNH). • 2011 – 2014: CNH expanded rapidly, Dim sum bonds rose, and RMB deposits in Hong Kong exceeded 900 billion yuan. In 2015, the inclusion of the Chinese yuan in the SDR significantly increased its international recognition. 2016-2018: The pressure of RMB exchange rate reform and depreciation, tightening regulation, and increased volatility in the CNH market. Starting from 2020, the pilot of digital RMB and the promotion of CIPS cross-border system have led to a resurgence of growth in CNH business. 2023-2024: RMB settlement accounts for nearly 50% of China's foreign trade; The Chinese yuan in SWIFT once held a global payment share of 4.6%, returning to fourth place in the world. 3、 Main offshore center role Regional role and characteristics Hong Kong is the world's largest CNH market, with RMB international bridge deposits exceeding 1 trillion yuan, and Shanghai Hong Kong Stock Connect, Bond Connect, CIPS and other interconnection mechanisms are complete Singapore Southeast Asia RMB Business Center and China have a swap line of 150 billion yuan, serving RCEP and the "Digital the Belt and Road" The average daily RMB transaction in London's European RMB foreign exchange trading hub exceeded US $210 billion, and Dim sum bonds were actively issued Dubai Middle East RMB settlement starting point service "the Belt and Road", oil RMB settlement potential 4、 The difference and linkage mechanism between CNH and CNY Project CNHCNY The exchange rate mechanism fluctuates in the market and responds more sensitively. The People's Bank of China sets a central parity rate with a daily fluctuation of ± 2% The supervision is conducted by the offshore center, such as the Hong Kong Monetary Authority, and supervised by the People's Bank of China/SAFE High convertibility, relatively free cross-border capital with restrictions under capital account The application of laws is protected by foreign laws and protected by Chinese laws Both are settled through trade CIPS、 The clearing bank forms an arbitrage and adjustment mechanism, and the long-term trend is basically consistent. 5、 Market situation and usage scenarios Deposit size: The global CNH deposit is about 1.5 trillion yuan, of which Hong Kong accounts for 2/3. Payment status: The RMB share in SWIFT will remain stable at 3-4% in 2024, with a peak of 4.6%. • Bond market: In 2023, the issuance of Dim sum bonds will reach 29 billion US dollars, a new high in recent years. • User subjects: including central banks, commercial banks, trading enterprises, investors, etc. • Usage scenarios: • Settlement of cross-border trade in goods and services (especially along the the Belt and Road) • Offshore RMB bond financing (Dim sum bonds) Cross border e-commerce and consumer payments (e-commerce platforms, overseas study/travel payments) • Investment, financing and loans (RQFII, Bond Connect, overseas mergers and acquisitions of enterprises, etc.) 6、 Digital Trends: e-CNY, CNHT, mBridge Fusion E-CNY: The pilot of the central bank's digital RMB is gradually expanding in Guangdong Hong Kong Macao, cross-border payments, and retail settlements, and may provide CNH digital forms (overseas wallets) in the future. CNHT (stablecoin): A stablecoin anchored to offshore Chinese yuan (such as Tether), although currently small in scale, can be used for DeFi and cross-border transfers, and is an experimental form of CNH blockchain. MBridge: a multi central bank digital currency cross-border platform jointly promoted by China, Hong Kong, the United Arab Emirates, Thailand, and BIS, with testing covering HKD 170 million in cross-border transactions, is expected to become the core of CNH's digital payment network. 7、 Development opportunities and challenges • Opportunities: The trend of geopolitical de dollarization is increasing, and the demand for RMB settlement is growing rapidly CIPS, mBridge and other infrastructure support cross-border clearing Continued policy support for offshore centers such as Hong Kong Digital RMB and stablecoin technology promote the acceleration of RMB internationalization • Challenge: The Chinese yuan is not yet fully convertible, and capital controls are still in place The trust level in overseas markets is lower than that of the US dollar, and international investors have limited motivation to allocate funds The depth of financial products, derivatives and other markets needs to be improved The transparency of exchange rate policies and the guarantee of the rule of law still need to be enhanced 8、 Outlook Summary As one of the core tools for RMB internationalization, CNH has established a clearing network, participant system, and policy framework. The use of the Chinese yuan in global trade, reserves, and financial products is steadily increasing. With the development of tools such as digital RMB and CNHT, as well as the improvement of cross-border systems such as CIPS and mBridge, CNH will become an important form of global circulation of RMB. In the near future, CNH is expected to gradually move from a "regional settlement currency" to a "global reserve asset" role.