The yuan kept its fourth-place spot in the ranking of
payment currencies last month, with its share of global transactions rising to
4.74% from 4.61% in June. The increase was observed in data from the Society
for Worldwide Interbank Financial Telecommunication (Swift), the world’s
largest interbank messaging service.
It was
the ninth consecutive month the Chinese currency has stayed above 4%.
Swift payment data is a major indicator for the relative
status of international currencies. Other metrics include frequency of use in
foreign exchange markets, commodity trading and governments’ foreign reserves.
The data shows the value of payments settled in yuan
increased by 13.4% as compared to June, outpacing the 10.3% growth recorded
across all currencies.
The world’s second-largest economy first encouraged the use
of its currency in international trade settlements in 2009, part of its
response to the global financial crisis.
Yuan
usage has been on the rise since Russia was ejected from the US dollar system
after its invasion of Ukraine in February 2022. A vast majority of China and
Russia’s US$240 billion trade last year was settled in either yuan or roubles.
Beijing’s policymakers have continued to promote the yuan as
an alternative currency in international trade, as the perceived weaponisation
of the US dollar against Russia has sent chills through emerging markets.
In response, countries such as Brazil have expressed a greater openness to
accepting Chinese currency.
“Despite depreciation pressures, the yuan’s internationalization
has advanced this year, with its overseas use on the rise,” said Ding Shuang,
chief Greater China economist at Standard Chartered Bank.
Standard Chartered’s renminbi globalization index, which
also tracks the yuan’s international use, continued to grow this year after a
strong 33 per cent% increase in 2023 in alignment with Swift data.
The yuan surpassed the Japanese yen as the world’s fourth
most active currency in global payments in November 2023, following the US
dollar, euro and pound sterling.
In July 2024, the US dollar accounted for 47.8% of global
payments, followed by the euro at 22.5% and the pound sterling at 7.0%, Swift
data showed.
The yuan also secured the No. 2 position in the trade
finance market with a 6% stake, higher than the euro’s 5.8% and second to the
US dollar’s considerable share of 83.2%.
As the
Global South looks to avoid overreliance on the US dollar amid rising
geopolitical tensions, Ding said, the yuan is well-positioned to expand
its global role.
But he also pointed out the inherent difficulty of further
breakthroughs after the yuan’s internationalization reaches a certain level,
considering the state of the country’s capital controls.
“To
strengthen confidence in the yuan, the currency’s exchange rate but also the
openness of cross-border capital flow must play a role,” he said, stressing the
latter was not being prioritized sufficiently by Beijing.
“Currently, China is more focused on stability amid growing
external uncertainties. But in the long term, Beijing will need to further
relax its controls over capital accounts.”
