China’s Yuan on Top: Outpacing Dollar in Trade
The yuan has achieved a significant milestone, surpassing the dollar in China's cross-border transactions last quarter, as per an analysis by Nikkei.
This achievement can be attributed to a more open capital market and increased yuan-based trade with Russia.
Nikkei’s study focused on international trade based on currency, using statistical data from China’s State Administration of Foreign Exchange. However, it’s important to note that the analysis excluded yuan-based settlements involving countries other than China.
According to SWIFT’s report in June, the dollar remains the dominant global currency with a share of 42.02%, while the yuan holds a 2.77% share and ranks fifth after the euro, the U.K. pound, and the Japanese yen.
Despite its gains, the yuan’s share in global payments remains relatively small compared to China’s economy. Nevertheless, bilateral payments supported by China’s economic influence have been steadily expanding its presence.
In 2022, cross-border settlements in yuan reached 42.1 trillion yuan ($5.85 trillion), with capital transactions accounting for approximately 75% of that figure, and current-account transactions, such as trade, comprising the rest.
During the last quarter, yuan-denominated international payments increased by 11% to $1.51 trillion, while dollar payments declined by 14% to $1.4 trillion. This marked the first time since 2010 that the Chinese currency surpassed the dollar in this regard.
The rise of the yuan can be attributed to China’s efforts to open its capital markets and move away from the dollar in trade. The country has facilitated foreign investors’ access to yuan-denominated stocks and bonds through programs like Stock Connect and Bond Connect.
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Additionally, Russia has been increasingly using the yuan, especially for Chinese purchases of its oil, as Western sanctions severed its access to the dollar and euro payment networks. In March, the Chinese currency accounted for a record 39% of the total volume in Russia’s foreign exchange market.
Beijing is actively pursuing the internationalization of the yuan and has been signing bilateral agreements to promote its use in cross-border payments. Some emerging economies are also seeking alternatives to the dollar due to Washington’s use of the greenback’s dominance for imposing sanctions on Russia.
The shift toward the yuan could potentially lead to currency decoupling or the formation of currency blocs, with major democracies continuing to use the dollar while countries with close ties to China move toward the yuan.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
