Although trade finance continues to be dominated by US dollars (USD), China’s yuan currency, also known as Renminbi (RMB) became the second-most used currency in trade finance in October, according to a story on Reuters, citing global transaction services system SWIFT. This indicates the rising role of China in the world economy and it pushed out the euro (EUR) from second place.
The USD still has 81.08% of trade finance or Letters of Credit and Collection. The share of RMB rose to 8.66% in October, up from 1.89% in January 2012. The percentage of China’s total trade settled in RMB is up to nearly 20%, from 12% in 2012 However the RMB is till only the 12th payments currency of the world and its market share was 0.86% in September but fell to 0.84% in October.
Germany and Australia were among the top 5 countries using the yuan for trade finance in October, as well as the more expected China, Hong Kong, Singapore.
According to Franck de Praetere, SWIFT’s Asia Pacific head of payments and trade markets: “The RMB is clearly a top currency for trade finance globally and even more so in Asia”.
RMB payments increased in value by 1.5 percent in October, while growth for all payments currencies was at 4.6 percent.
China is the second biggest economy. It aims to lift the global role of the RMB currency and offer an alternative to world reliance on the USD. It is also hastening financial reform to promote its currency to international market participants.