China’s currency, the yuan, has taken a significant stride in cross-border transactions, for the first time becoming the dominant currency in such activities within China, writes Nikkei Asia in its latest report.
In the last quarter, it accounted for 49% of these transactions, marking a substantial shift in the nation’s financial landscape.
Nikkei analysts point to the accessibility of the capital market and an increased volume of yuan-based trade with Russia as the primary drivers of this change.
However, the yuan’s role in the global payments ecosystem remains comparatively minor, with its share standing at 2.77%.
But this figure represents a significant uptick from its position five years ago, where it only accounted for 1.81% of the global payments.
The dollar’s supremacy in the global arena remains undisputed, with data from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) indicating a commanding lead at 42.02%.
However, there are signs that China’s economic clout is slowly shifting the balance of financial power. Bilateral payments have expanded, influenced by the nation’s burgeoning economy.
The last quarter witnessed an 11% increase in yuan-based international payments, totaling US$1.51 trillion, edging past the dollar payments which fell by 14% to US$1.4 trillion.
Observers suggest that this move toward the yuan is fuelled by China’s strategic opening of its capital markets and a concerted effort to reduce its reliance on the dollar in international trade.
In essence, these trends highlight the escalating importance of the yuan in China’s domestic and international financial transactions, which is likely to reverberate through global financial markets, though the US dollar continues to maintain its dominant position.
The coming years could prove pivotal in determining the extent of the yuan’s role in the global financial landscape.