International payments using Chinese renminbi (Rmb) fell by 29.5% in 2016, amid the government’s about-face on its internationalisation.

The Rmb has now fallen out of the world’s top five payment currencies, with the Chinese economic slowdown, forex volatility and the regulatory measures taken by Beijing to stem capital outflows all likely to be contributing factors.

In December, GTR reported that China’s erstwhile aggressive push to liberalise and internationalise the currency had been placed on the backburner, with the Rmb facing its worst year since it was unpegged from the US dollar in 2005.

Chinese currency reserves reached a five-year low, while the government moved to limit the amount of equity that companies operating in China can send to offshore operations. This followed moves to cap foreign investments by Chinese companies.

It all amounts to annus horribilis for China’s currency, which went from a 2.31% in global trade payments in December 2015 to 1.68% in December 2016.

Despite this, Swift, which compiled the data, remains confident that these are essentially teething problems.

“Despite the slowdown, Rmb internationalisation will continue to benefit from major financial infrastructure milestones, such as CIPS [Cross-Border Interbank Payment System – China’s payments architecture] for cross-border clearing and a forthcoming Rmb offshore centre in the United States,” says Michael Moon, Swift’s head of payments market for Asia Pacific.

It’s a view shared by HSBC, which along with Swift, is one of the institutions to have invested most in the Rmb’s expansion over recent years.

The bank continued to be active in Rmb lending through 2016. In August, it signed a pre-export finance facility with Henan Jinli Gold & Lead, worth Rmb100mn (about US$14mn). In December, it closed a Rmb350mn (US$50mn) pre-export finance transaction with Tianshan Aluminium, along with the Korean Development Bank.

The bank’s global head of Rmb internationalisation, Vina Cheung, says: “The maturing of the Rmb as a global currency is bound to involve some volatility, largely because of global macroeconomic factors.”

She adds: “But we believe Rmb internationalisation is a long-term structural trend that is progressing to the next level, with better clearing infrastructure aligning to global currency settlement and global users now equipped with better knowledge of China’s regulatory framework. Payments and trade settlement were a key catalyst for early international use of Rmb and will continue to be at the heart of its emergence as a global currency.”