"Renminbi" (人民币) means "the people's currency."
The unit of Renminbi is the yuan (¥ or CNY).
So technically, Renminbi is the name of the currency, and yuan is the unit, alike to how "pound sterling" is the currency, and "pound" is the unit in the UK.

But what makes it feel like China has two currencies is the difference between:

2. Onshore Yuan (CNY) vs Offshore Yuan (CNH)

These are two markets for trading the yuan:

A. CNY – Onshore Yuan

Used within mainland China.
Controlled by the Chinese government (People's Bank of China).
Has strict capital controls (limits on the flow of money in and out of the country).
Exchange rate is managed by the state (a "managed float" system).

B. CNH – Offshore Yuan

Traded outside mainland China, mainly in places like Hong Kong, Singapore, London.
More freely traded — less government control.
The exchange rate is determined more by market forces (supply and demand).

Why the divided?

The Chinese government wants to:

Control its domestic economy and prevent capital flight.
But also internationalize the yuan (make it more widely used in global trade and finance).

So, this dual system allows:

Tight control at home (CNY),
Flexibility and global use abroad (CNH).

In short:

China doesn’t have two currencies, but two systems for trading one currency — the Renminbi — with CNY used domestically and CNH used internationally.

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Detail Info About "Why does China have two currencies"

why China has two versions of its currency, how this system evolved, and what it means for China and the world.

China’s currency is officially called the Renminbi (RMB), and the yuan (¥) is the primary unit of account (like "dollars" in USD). So when we say "two currencies," we're really referring to two separate markets or systems for the same currency: one onshore (CNY) and one offshore (CNH).

These two forms have different levels of control, accessibility, and exchange rate mechanisms.

Why Are There Two Versions?

Because China wants to balance two major goals:

Control its domestic financial system
Encourage international use of its currency

This balance is tricky, so China developed a dual-track currency system.

1. CNY: Onshore Yuan

Full Name: Chinese Yuan Renminbi (CNY)
Where it's used: Inside mainland China
Controlled by: The People’s Bank of China (PBoC), the central bank
Key features:
- Strict capital controls: Foreign investors and Chinese citizens face limits on how much currency can flow in/out of the country.
- Managed exchange rate: The PBoC sets a daily reference rate and allows the currency to float within a small band.
- Monetary policy tool: China uses CNY to control inflation, regulate trade balance, and steer economic development.

2. CNH: Offshore Yuan

Introduced: In 2010, starting in Hong Kong
Where it’s used: Outside mainland China – primarily Hong Kong, Singapore, London, etc.
Freely traded: Exchange rate is mostly market-driven.
More liberalized:
- No or minimal capital controls.
- Allows foreign businesses and investors to trade yuan more easily.
Used for:
- International trade and settlement
- Issuing "dim sum" bonds (bonds denominated in yuan but issued outside China)
- Offshore investment funds

Why China Made This System

A. Maintain Domestic Control

China wants to avoid:
- Sudden capital flight (money leaving the country)
- Volatility from global markets
- Loss of control over monetary policy
Capital controls help insulate the economy.

B. Encourage Internationalization of the Yuan

China wants the yuan to become a global reserve currency, like the U.S. dollar or euro.
By allowing offshore markets to trade yuan (CNH), it:
- Facilitates global trade in yuan
- Helps China reduce reliance on the U.S. dollar
- Attracts foreign investment

C. Step-by-Step Liberalization

Instead of opening its entire economy at once, China uses CNH as a testbed.
Observes how markets behave with less control before applying reforms onshore.

Key Differences Between CNY and CNH

Feature	CNY (Onshore Yuan)	CNH (Offshore Yuan)
Market	Mainland China	Outside Mainland (e.g., Hong Kong)
Exchange Rate	Controlled by PBoC	Market-driven
Capital Controls	Yes	Minimal
Liquidity	Higher	Lower (but growing)
Access	Limited to approved parties	Freely accessible globally
Introduced	Longstanding	2010 (in Hong Kong)

Impacts and Implications

Pros:

Lets China manage its internal economy while gaining global financial power.
Attracts foreign investors without giving them full access to the domestic system.
Builds trust in yuan as a global currency over time.

Cons / Risks:

Dual rates can confuse investors and traders.
Can lead to arbitrage opportunities (buy low in one market, sell high in another).
Makes policy coordination harder between onshore and offshore markets.
Transparency and trust in Chinese financial data remain concerns for global users.

Real-Life Example

Let’s say a European company wants to trade with a Chinese firm and settle the payment in yuan:

If they use CNY, they must go through China’s banking system, which is slower and regulated.
If they use CNH, they can settle the payment in Hong Kong with fewer restrictions.

Conclusion

China doesn’t technically have “two currencies,” but rather a dual-currency system that lets it:

Control its domestic economy (CNY)
Expand its global financial influence (CNH)

It’s a clever workaround that replicates China’s cautious, planned approach to financial liberalization and global leadership.

Summary:

China uses two currencies—CNY (onshore) and CNH (offshore)—to regulator its domestic economy while allowing limited international trade and investment.