Onshore market participants can buy or sell common European options of CNY against foreign currencies on a real needs basis. Tenors are available out to three years, with further tenors on a case-by-case basis. The best liquidity is found in tenors of one year or less.

The SAFE started allowing corporates to sell FX options from August 2014 on a real needs basis and with net settlement allowed. Previously, corporates were only allowed to buy FX options onshore.

The China interbank market started LPR (Loan Prime Rate) interest rate option trading on 23 March 2020. European LPR caps/floors and LPR IRS swaptions are tradable in the market at the moment.

In the offshore market, USD-settled non-deliverable options (NDOs) are available on the CNY out to five years and further tenors are available on a case-by-case basis. Options expire simultaneously with the NDF fixing publication.

A range of FX structured products are also available for risk management or investment purposes.Cross-currency swaps (CCS)

Since August 2007, institutions with FX forward licences – designated foreign exchange banks (DFXBs) – have been able to trade CNY currency swaps in the interbank market. On the China Foreign Exchange Trade System (CFETS) the currencies available to be traded against the CNY in CCS are the USD, HKD, EUR, JPY, AUD and GBP.

Banks have been allowed to offer CCS to corporate customers since 1 March 2011. The foreign currency regulations that apply to spot and forward transactions are similarly applicable to the initial and final principle exchanges, respectively, in CCS. Customers can sign either ISDA or NAFMII as their master agreement.

The USD rates in CCS could be LIBOR or fixed rates. The CNY rates in CCS could be SHIBOR,LPR rates, repo rates, deposit rates, or fixed rates. The tenor is up to 10 years and the best liquidity is within three years.

As the accrual period and payment arrangement are highly customisable, CCS can be tailored to match underlying assets/liabilities. Panda bond issuers receive CCS to convert CNY proceeds into FCY, while other investors obtain synthetic CNY funding by borrowing FCY debt and paying CCS.