RMB Cross-Border Payments Surpass Euro
Our usual focus is on the share of the Chinese yuan in global payment currencies.
According to SWIFT statistics, the global payment share of the yuan in July was 4.74%.
This figure not only allows the yuan to surpass the Japanese yen for the ninth consecutive month to rank fourth globally but also sets a historical high.
Ahead of the yuan are the US dollar at 47.8%, the euro at 22.47%, and the British pound at 7%.
In addition to paying attention to the overall global payment share of various currencies, it is more important to care about the payment proportion in trade in goods and services, that is, cross-border payments.
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It should be noted that the global payment share and cross-border trade payment are inclusive and contained relationships.
Cross-border payment is just one of the global payments, used to measure which country's currency is used for settlement when countries do business, in addition to which global payment also includes the use of currency in other fields, such as investment, financing, secondary income transfer, etc.
SWIFT also publishes data in this regard.
In July 2024, in the ranking of indicators measuring cross-border trade payments of various countries' currencies, our yuan ranked second, accounting for 6%, ranking only after the US dollar and before the euro.
The British pound and Hong Kong dollar, which rank third and eighth respectively in the global payment share, did not appear in the top ten of the cross-border trade payment list.
This is logical.
Because London and Hong Kong are global financial centers, making the British pound and Hong Kong dollar have unique advantages in the aforementioned investment and financing and other aspects.
Excluding the use of these fields, only looking at the settlement currency chosen by countries when trading, they fell out of the top ten.
The reason why the yuan can surpass the euro to become the second largest cross-border payment currency in the world depends on internal and external factors.
In terms of internal factors, since the central bank proposed the internationalization of the yuan, our country has made great efforts in this regard.
Not only actively negotiate with overseas countries, asking them to use the yuan for settlement as much as possible when doing business with China, but also sign currency swap agreements with many countries, which is conducive to improving the enthusiasm and convenience of foreign economies to use the yuan.
In terms of external factors, the European Union's involvement in the Russia-Ukraine conflict has given the yuan an opportunity.
Before the outbreak of the Russia-Ukraine war, the trade between mainstream European countries and Russia was very close.
European countries need to import energy products such as oil, natural gas, and coal from Russia, while exporting high-tech and light industrial products that are scarce in Russia.
These trades are basically settled in euros.
After the conflict broke out, the European Union followed the United States to sanction Russia, and the normal trade between the two sides was severely damaged and almost stagnant.
On the contrary, China and Russia have strengthened trade cooperation, and the bilateral trade volume has greatly increased, using the yuan for transactions.
In other words, a part of the euro's cross-border trade payment share was "taken away" by the yuan.
The use of the yuan in trade with Russia is just a microcosm.
The biggest weapon for our country to promote the internationalization of the yuan is the huge volume of trade in goods.
China has always been the first in the world in terms of total import and export, we export a large amount of goods to various countries, and also buy a large amount of goods from all over the world, taking advantage of the position of a strong trading country to gradually play a greater role in the field of cross-border payment.
Combined with the transformation and upgrading of China's manufacturing industry, when some of the products manufactured by our country's enterprises have very high technological content and even reach the unique situation of "there is no such shop after this village", we can even require buyers to pay only in yuan or buy at a discount when settled in yuan.
Of course, in the process of internationalization of the yuan, it is necessary to recognize the opponent and oneself, and never be complacent.
There are two points to note.
First, the advantage of the US dollar is still huge.
In the statistical share of all scenarios of the currency system, the US dollar accounts for 47%, close to half; in the cross-border trade payment scenario after excluding investment and financing, the advantage of the US dollar is greater, accounting for 83%, more than 80%.
This shows that when countries do business around the world, they mainly use the US dollar for payment and collection, whether it is the yuan, euro or yen, there is a huge gap in recognition with the US dollar.
Second, it is necessary to gradually expand the circulation range of the yuan.
Cross-border trade ranks second, and the global payment share ranks fourth.
The gap between the two points out the direction for us, that is, to improve the status of the yuan in investment and financing and other non-trade fields.
How to do it?
The first step is to gradually expand the free circulation of the yuan.
Our country has retained capital controls for capital projects until now, and the yuan is not available for exchange with foreign currencies and free circulation around the world at any time and place, which limits the role of the yuan in the field of investment and financing.
Of course, capital controls have benefits and can protect China's financial market from international capital attacks, so I am not saying to completely cancel capital controls immediately.
However, gradually expanding the circulation range of the yuan, and making it convenient for enterprises and investors around the world to obtain and use the yuan must be our goal for future development.
I believe that with the continuous strengthening of China's financial and economic strength, the reforms around the circulation of the yuan will definitely make breakthrough progress and help to improve the degree of internationalization of the yuan.