I am travelling to China soon via Hong Kong, I require some RMB is it better to change money before I travel out to Hong Kong or to change this in Hong Kong? Also what is meant by the fact RMB is not a freely convertible currency?
You do not mention what country you come from but if it is Europe of the USA change the money in Hong Kong, somewhere like the good old Chungking Mansions, the commissions they charge is 0.3%-0.5% yes 1/2 of a percent. While in the UK and most airports I have found that companies and organisations either give you a shitty exchange rate and charge you a high commission upto 5% sometimes this is unacceptably high for me. In the Mansions or even at the airport the charges are less and they will give you closer to the spot rates, but only at the private booths. Western Union booths will give you a shitty rate and they are parked right next to the private booths.
The hotel exchanges will also give you a shitty rate too. Of course you could just draw money out at an ATM as most cards work unlike Korea that demands international ATMs (that lead to some well dodgy things when I was in Korea last year) . The ATM with drawls give you close to the spot rates but you get hit with commission form your bank back home. I typically draw out $1000HKD while in HK and 500RMB when in China and my bank Barclays tends to take £1.50-£2 commission off me about 2.3%.
The lack of freely convertible currency only really matters in China itself, effectively when you are in China you are only allowed to change 50K of USD (or equivalent) into RMB and of this only draw out 20% of this at any one time. This is when you change money at banks, that are supposed to record your ID and transaction, however in practice is not erm practiced.
This however does not apply to the black market, the black market is everywhere. On the border between Mongolia and China there are folks who sit there with bags of money to change money and they don't care.
While in Hong Kong you can change as much as you damned please, as they generally tend not to care same with Macau, even though these places are supposed to be China. I remember watching an Indian guy bring a briefcase filled with $100US bills changing them for RMB in Macau who then stuck it all on a roulette table and lost.
However if you are going to China try not to carry only 100RMBs around, as this is a huge amount of money in many places, even in Beijing tourist traps people became pissed off with me for handing them 100RMB notes for 5 RMB transactions. RMB coins are useful for the Beijing metro too. Outside tourist traps like the Beijing Hutongs 100RMB will often not have change for and some vendors will simply take the whole note and give you no change.