Yuan’s share of global payments rises to record on China push
2014-10-30 12:22:59
The yuan’s share of global payments rose to a record last month as China bolstered efforts to promote international use of its currency.
The yuan accounted for 1.72 percent of payments, up from 1.64 percent the previous month, Society for Worldwide International Financial Telecommunications reported today. The value of transactions increased 13.2 percent and the currency ranked seventh in terms of usage, Swift said.
China started direct trading between the yuan and the Singaporean dollar this week, after last month making the euro exchangeable for its currency in Shanghai. Similar links exist for the U.S., Australian and New Zealand dollars, the British pound and Japan’s yen, while South Korea plans to announce measures tomorrow to support yuan-related financial services.
“We’re seeing companies seize the opportunities presented by China’s currency liberalization to deepen business relationships in the world’s second-largest economy,” Vina Cheung, global head of RMB internationalization, payments and cash management at HSBC Holdings Plc in Hong Kong, said in an e-mailed statement. “The growth in renminbi payments between offshore trading centers such as Singapore, U.K. and Germany is encouraging.”
China appointed yuan clearing banks this year in Frankfurt, Paris and Luxembourg, and France, Germany and South Korea were awarded quotas under the Renminbi Qualified Foreign Institutional Investor program to invest overseas holdings of the currency in China’s domestic capital markets. Renminbi, or RMB, is the official name for the yuan.
The U.K., Hong Kong and Singapore also have RQFII allocations and the European nation sold yuan-denominated sovereign bonds this month for the first time.
Convertible Yuan
A third of China’s trade will be settled in yuan by 2015 and the currency will become fully convertible by 2017, HSBC said in today’s statement, reiterating forecasts. The currency has strengthened 0.4 percent against the dollar this month, trimming its loss for the year to 1 percent, according to data compiled by Bloomberg. It’s advanced 35 percent since a dollar peg ended in 2005.
China should take the opportunity to improve the market-oriented mechanism of the yuan when investors no longer expect moves to be one-sided, Guan Tao, head of the balance of payments department at the State Administration of Foreign Exchange, wrote in an article in the Shanghai Securities News today.
Yuan payments in Singapore surged 574 percent over the last nine months, the biggest jump among offshore yuan hubs excluding China and Hong Kong, according to Swift. Luxembourg and the U.K. boasted the second- and third-highest growth rates. About 28 percent of securities settlement confirmations in yuan were conducted outside China and Hong Kong, compared with 16 percent two years ago, Swift said.
“Payments, FX and trade finance are the markers to watch for growth in RMB internationalization,” Alex Medana, Hong Kong-based director of securities markets for Asia Pacific at Swift, said in today’s report. “The RMB is primarily used as a trade settlement currency, but it is worth noting that the RMB is steadily making progress as an investment currency.”