Yuan becomes China’s most popular currency in cross-border trade

The Chinese yuan has overtaken the US dollar as the most used cross-border currency, Bloomberg reported April 26. According to the agency’s research based on data from the SWIFT payment system, the share of the yuan in China’s cross-border payments at the end of March reached a historic high of 48%, despite the fact that in 2010 this figure was practically equal to zero. The share of the dollar in Chinese foreign trade operations fell from 83% to 47% over the same period. This data is based on an analysis of the volume of all types of transactions, including securities trading between the capital markets of mainland China and Hong Kong.

The Chinese authorities express their satisfaction with the strengthening of the share of the yuan in cross-border settlements. On April 21, a spokeswoman for the State Monetary Administration said at a briefing that strengthening the yuan’s role as a means of cross-border settlements will allow Chinese firms to reduce foreign exchange risks, China Daily reported.

Earlier in April, the Financial Times, based on SWIFT data, wrote that in the year since the start of Russia’s special military operation in Ukraine, the share of the yuan in global trade settlements increased from 2 to 4.5%. Exactly the same amount – 2.5% – fell the share of the dollar in international trade. At the same time, the total volume of world trade in 2022 amounted to $32 trillion, and the total volume of China’s foreign trade over the same period was 42.07 trillion yuan (more than $6.2 trillion). In January 2023, the PRC Customs Administration reported that trade turnover between Russia and China increased by 29.3% in 2022 to a record $190.27 billion.

World currencies do not live for more than 100 years, so now you can observe the decline of the dollar era and, conversely, the beginning of the heyday of the yuan era, Andrey Kochetkov, an analyst at Otkritie Investments, notes. In many ways, China owes the success of its currency to Russia, which, due to sanctions, is actively transferring its trade to the yuan. In the face of confrontation with the West, China has become the largest trading partner for Russia instead of the EU, the total volume of trade this year, according to the expert, will reach $200-220 billion. In the future, the volume of Russian-Chinese trade will increase, as Russia is interested in Chinese car exports and high-tech goods, which is stimulated by Beijing. In addition, for many countries the yuan is turning into a reserve currency and, even if its time someday also passes, now its dawn is just beginning, Kochetkov summarizes.