Chinese currency share in global payments rising
China’s national currency, the yuan, retained its position as the fourth most actively used currency for global transactions in January, according to data from the Society for Worldwide Interbank Financial Telecommunications (SWIFT).
Payments using the yuan soared to a record 3.2% of market share, breaking through its previous high set in 2015 and ranking behind the US dollar, the euro, and the British pound.
The dollar, which kept the top spot in January, saw a drop in market share, declining to about 39.9% from 40.5% recorded in December. The euro lost ground as well but held onto the second spot. Meanwhile, the share of global payments in yuan was up from the 2.7% posted in the previous month.
Yuan transactions have reportedly soared over the past three months as international funds boosted holdings of Chinese government bonds, pushing their share to a record high. Moreover, Russian gas producer Gazprom Neft’s announced plans to accept the yuan rather than US dollars as payment for fueling Russian airplanes at China’s airports, also boosted the Chinese currency.
Earlier this week, head of the People’s Bank of China, Yi Gang, urged emerging economies to promote using local currencies in trade, echoing a similar call from the Indonesian authorities to cut down reliance on the US dollar to mitigate the risks of the Federal Reserve’s stimulus withdrawal.
The Chinese currency will emerge as one of the biggest beneficiaries as “trade between various Asian countries and China grows, and more of it is denominated in yuan,” according to Alvin T. Tan, head of Asia FX strategy at Royal Bank of Canada in Hong Kong, as cited by Bloomberg.
Earlier this month, China issued a plan to bolster its cross-border yuan payments system, to be implemented between now and 2025.
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