Chinese Yuan Surpasses Euro as Second Most Used Currency in Trade Finance Markets
A recent report by the Society for Worldwide Interbank Financial Telecommunications (SWIFT) reveals that the Chinese yuan has overtaken the euro to become the second most used global currency in trade finance markets. SWIFT, which is the standard payment solution for cross-border transactions, reported that the yuan held a 5.80% share in September, surpassing the euro’s share. This marks a significant growth for the yuan, which had a 4.82% utilization rate in August.
Other Major Currencies in Trade Finance Markets
The euro secured a share of 5.43% in trade finance markets, placing it behind the yuan. The Japanese yen came in fourth with a 1.40% share. However, when considering all types of messages, the yuan ranks fifth among global payments currencies with a 3.71% share.
Dominance of the U.S. Dollar and Yuan Internationalization
Despite recent discussions about the decline of dollar hegemony and its use as a geopolitical weapon, SWIFT data shows that the U.S. dollar remains the dominant global currency with an 84.15% share in finance markets. Additionally, the dollar maintains its position as the top global payments currency within SWIFT’s messaging system, holding a 46.58% share.
The internationalization of the Chinese yuan has been remarkable, progressing from being the 35th most used currency in 2001 to its current status as a major player. In fact, China used more yuan than dollars for international settlements for the first time in April, indicating its desire to reduce reliance on the American currency.
The Future of Yuan Internationalization
The future of yuan internationalization may extend beyond SWIFT as China explores the potential of its central bank digital currency (CBDC), known as the e-CNY. The e-CNY, which operates outside the traditional financial system, could strengthen the yuan’s position on the global stage. Reports suggest that central banks have expressed concerns about the Mbridge project, a joint CBDC interconnection network involving China, Hong Kong, Thailand, and UAE. This project aims to facilitate trade using the digital yuan, bypassing conventional channels.
Hot Take: Chinese Yuan Surges Ahead in Global Trade Finance Markets
The latest report by SWIFT highlights the Chinese yuan’s impressive growth in global trade finance markets. Surpassing the euro, the yuan now holds the second position behind the dominant U.S. dollar. This achievement underscores China’s ongoing efforts to internationalize its currency and reduce reliance on the dollar. With the rise of its central bank digital currency, the e-CNY, China may further enhance the yuan’s prominence on the global stage. As China explores alternative channels for international transactions through projects like Mbridge, it is clear that the yuan’s influence is set to continue expanding in trade finance markets.
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