The internationalization of the renminbi, also known as the yuan, has been advancing steadily, with an increasing share in global payments. According to data updated by global financial messaging services provider Society for Worldwide Interbank Financial Telecommunication (SWIFT), the yuan’s share in global payments stood at 3.06% in July, up from 2.77% a month earlier. It is the second time on record that the Chinese currency has stood above the 3% level. Its share reached 3.2% in January 2022. In July, the renminbi retained its position as the fifth most active currency for global payments for the 18th consecutive month, SWIFT said. Use of the yuan has also increased in the trade financing market, up from 4.2% in June to 4.57% last month. In terms of foreign exchange spot transactions worldwide, the yuan ranked as the fifth most frequently exchanged currency for the third consecutive month in July, SWIFT added. The fifth position was taken by the Canadian dollar in April, when the renminbi ranked sixth.
Wang Youxin, Senior Researcher from Bank of China (BOC), said that the yuan has gained increasing recognition among international investors in terms of global payments, investment, financing, trade in foreign exchange and international reserves. The trend has been especially noticeable over the past 12 months, as the yuan’s weight in the International Monetary Fund’s Special Drawing Rights currency basket was raised from 10.92% to 12.28% last August.
The yuan’s more frequent use in cross-border trade and investment over the past few months has also facilitated the internationalization of the Chinese currency, according to the second-quarter monetary policy report released by the People’s Bank of China (PBOC) on August 17.
In the first half, the total value of cross-border renminbi payments surged 20% year-on-year to CNY24.5 trillion, accounting for 57% of all cross-border payments settled in domestic and foreign currencies in the same period, the PBOC said. Cross-border renminbi payments used in the trade of goods accounted for 23% of all such payments recorded in the first six months, reaching the highest level in years and up 6.7 percentage points from 2022. During an industry forum held in Beijing on August 16, Lin Caiyi, Vice President of the China Chief Economist Forum Research Institute, said that the Chinese currency’s settlement level is still lower than that of the U.S. dollar or the British pound from a global perspective. In this sense, there should be more market trading for the yuan. More participation will result in higher market volatility, but will also be of long-term benefit to the renminbi’s internationalization, Lin said.
Much progress has been made in the yuan’s internationalization this year. The Central Bank of Argentina announced on June 29 it would accept renminbi as a currency for deposits and withdrawals in the Argentine banking system. The Central Bank of Brazil announced in late March that the yuan surpassed the euro to become the country’s second-largest international reserve currency. On March 28, Chinese national oil company CNOOC and France’s TotalEnergies settled the first yuan-denominated trade transaction for liquefied natural gas (LNG) via the Shanghai Petroleum and Natural Gas Exchange, the China Daily reports.
