Yuan use rises to 8th position
International payments in renminbi surge
The yuan became the world’s eighth most-used currency in international payments in December, the Society for Worldwide Interbank Financial Telecommunication said on Thursday. Lifted by the Chinese government’s efforts to promote its global clout, the yuan overtook 22 currencies over the past three years to achieve a market share of 1.12 percent, just behind the Swiss franc, which held a share of 1.29 percent.
This year, economists believe that the yuan’s influence is set to grow further as Beijing adopts new liberalization measures to facilitate the yuan’s cross-border movements.
“A question is whether the renminbi will continue its climb, or at least maintain its status as a ‘top 10’ currency for payments. We might expect it to fall back during the first quarter of 2014 as a result of the Chinese New Year, as we have seen previously, ” Franck de Praetere, head of payments and trade markets, Asia-Pacific, at SWIFT, told Asset Magazine on Thursday.
“The fact that between November and December 2013 other currencies grew 7 percent while the renminbi grew 15 percent, however, might suggest that use of the Chinese currency is becoming ‘business as usual’ for the world’s financial institutions and businesses.”
A surge in yuan-denominated trade helped boost the currency’s global clout. The People’s Bank of China said last week that global trade settled in yuan hit 4.63 trillion yuan ($764 billion) in 2013, up 57 percent from 2012.
China’s international trade reached $4.16 trillion in 2013, up 7.6 percent from a year earlier.
Cross-border direct investment denominated in yuan jumped 90 percent to 534 billion yuan in 2013.
SWIFT said in December that the yuan accounted for 8.66 percent of letters of credit and collections used in global trade finance in October, second only to the dollar.
The prospect of the yuan’s further appreciation this year against the US dollar offers a strong incentive for global traders and investors to continue to hold and use the currency, analysts said.
Qu Hongbin, chief China economist with HSBC Holdings Plc, has forecast the yuan will strengthen 1 to 2 percent this year. “The track is still upward for the yuan in 2014, but fluctuation along the way will be wider than ever,” Qu told a news conference earlier this month.
The yuan, which closed at 6.0510 against the dollar on Thursday onshore, will gain 1.4 percent this year to 5.97, according to the median estimate in a Bloomberg News survey.
Global trade settled in yuan reached $4.16 trillion in 2013, up 7.6 percent from a year earlier.