The Chinese renminbi has entered the top four in global payments currencies, new data from Swift shows.
The Rmb overtook the Japanese Yen in August 2015, highlighting the efficacy of China’s liberalisation and internationalisation programmes. It languished as the world’s 12th most used currency as recently as 2012, but now accounts for 2.79% of the global payments market.
While this is well behind the US dollar, which still dominates the global trade landscape, the Rmb’s importance is growing rapidly. It is now the most used currency for payments involving Greater China and the rest of Asia, an is also the second most used currency for letters of credit issued, showing its increased prominence in the trade finance world.
“In overtaking the Yen to break into the world’s top four payment currencies, the Rmb has passed another milestone in its rapid evolution and now looks set to become the leading global currency from Asia,” says Diane Reyes, HSBC’s global head of payments. “Growing use of the Rmb for cross-border trade and investment shows that demand isn’t simply driven by China’s domestic markets but that the currency’s becoming deeply embedded into the international economy.”
Rmb usage is expected to be a hot topic at next week’s Sibos conference in Singapore, as banks continue to roll out programmes involving the currency’s usage. Despite risk concerns over China’s economy, 1,134 banks are now using Rmb for payments with China and Hong Kong, while the IMF is expected to include it in its special drawing rights (SDR) basket of reserve currencies in 2016, having postponed a decision this year.
Offshore clearing centres around the world have helped develop the currency’s usage, with more expected to be announced in the near future.
“2015 has seen a big shift in the Rmb becoming a ‘business as usual’ payment currency. The use of additional offshore clearing centres outside of Hong Kong has played a key role in driving Rmb adoption, with most showing impressive growth in volume,” says Swift’s head of payments, Michael Moon.