China Economy: Yuan Secures Historic Share in Global Payments

In July, the Chinese yuan saw its share of global payments soar to a record high of 4.74%, marking a notable shift in China’s economy and its role in foreign exchange markets. This increase reflects a growing trend towards the internationalization of the renminbi, especially following geopolitical tensions, particularly the aftermath of Russia's invasion of Ukraine.

Yuan's Position in Global Payments

The rising prominence of the yuan is evident, as it retains fourth place among payment currencies, following the US dollar, euro, and pound sterling. Swift data indicates a 13.4% jump in payment values in yuan as opposed to a 10.3% growth across all currencies, further underscoring its increasing acceptance in global transactions.

The Impact of Geopolitical Events

Beijing’s efforts to promote the yuan as an alternative to the US dollar have gained momentum, especially after the swift expulsion of Russia from the dollar-based system. This shift has influenced countries like Brazil to explore yuan utilization in trade. Ding Shuang, Chief Greater China Economist at Standard Chartered Bank, noted the robust growth in the yuan’s internationalization, with a significant 33% increase in its global usage index this year.

Challenges and Future Outlook

While the yuan's presence in the trade finance market has reached an impressive 6%, second only to the dollar's dominance, experts indicate that further advancements require relaxing capital controls. China's economy must prioritize cross-border capital flow liquidity alongside maintaining stability amid external pressures.