Against the Current

The internationalization of the renminbi progresses amid exchange rate fluctuations

When the United States announced that it will impose an additional 10-percent tariff on $200 billion worth of Chinese products effective on September 24, the news further stirred the Chinese exchange rate market as 2018 has witnessed the ebb and flow of the renminbi exchange rate.

The yuan has depreciated by nearly 7 percent since mid-june, when the United States first made the new tariff threat, a signal of escalating Sino-u.s. trade tensions.

However, according to data released by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) in August, the renminbi remained the fifth most active payment currency in July, amounting to 2.04 percent of all payments, up 0.43 percentage points from June. In addition, the value of renminbi payments went up by 9.91 percent, while other payment currencies decreased by 2.5 percent on average month on month.

Today’s situation differs from the devaluation that took place in 2016 when the yuan’s international payment value declined as much as 29.5 percent compared to 2015, closing out the year in sixth place among currencies used for international payments.

As far as the internationalization of the yuan is concerned, the impact of this year’s exchange rate fluctuations is not as significant as 2016 because it is affected by both external and internal elements.

“The internationalization of the renminbi is a convergence of multiple elements, and the exchange rate is just one of them,” Sun Jie, a researcher with the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, told Beijing Review.

Roll booster

As an external factor in the progress of the