The onshore RMB (CNY) market has a long development time and a large scale, but its supervision is stricter. The central bank is an important participant in the foreign exchange market, which means that the onshore RMB exchange rate is greatly influenced by the central bank's policies. The offshore RMB (CNH) market has a short development time and a small scale, but it is less restricted. It is more influenced by international factors, especially the overseas economic and financial situation, which fully reflects the relationship between supply and demand of RMB in the market. There are great differences between the two markets in terms of participants, price formation mechanism and trading volume. The onshore and offshore RMB exchange rates will affect each other through various channels, which makes it difficult to maintain the interest rate spread at a high level for a long time. The spread between offshore RMB and onshore RMB is usually very small: from the middle of 20 12 years to before the exchange reform: generally within 400 basis points, most of the time within 100 basis points. The main reason why large spreads are usually unsustainable is that trade and financial channels will make onshore and offshore RMB prices converge. At present, the onshore and offshore RMB exchange rates mainly affect each other through three channels: one is through the trade settlement of cross-border import and export enterprises, and the other is through the NDF market. Third, information or confidence channels will also lead to the convergence of exchange rates between the two places.

When offshore RMB is weaker than onshore RMB, cross-border export enterprises will tend to trade in offshore market, because the same dollar income can be exchanged for more RMB income in offshore market. Exporters selling dollars and buying RMB in the offshore market will make the offshore RMB appreciate. Cross-border importers tend to trade in the onshore market, because the onshore market can buy the same amount of US dollar import expenses with less RMB. The behavior of importing enterprises to sell RMB and buy US dollars in the onshore market will devalue the onshore RMB. As a result of these transactions, the spread between onshore and offshore RMB exchange rates will narrow. However, the government still has restrictions on this behavior of cross-border import and export enterprises. If cross-border trading enterprises choose to trade in the offshore market, that is, according to the offshore exchange rate, then the benefits brought by such transactions cannot be transferred back to the onshore market.