Tag: Yuan

International Use of Yuan Surging

The global use of the yuan has surged, according to a report by SWIFT, the communication platform among international banks. The People’s Bank of China estimates that overseas importers will be able to save 2-3% of their invoice bills if they pay in yuan.

Trade with the yuan accounted for approximately 10% of China’s total foreign trade in July. Patrick de Courcy, head of markets, Asia-Pacific, for SWIFT said that, “The existing arrangement for offshore renminbi clearing has served the industry well, to date. In the medium to long term, however, it is important that we have an enhanced platform.”

At the moment, according to the report, there are still obstacles for European companies interested in using the yuan. The obstacles include a show payment process and difficulties with getting approval for payments from authorities, according to a recent survey by the Deutsche Bank.

The Peterson Institute for International Economics has shown that a cross-border trade in yuan is going to triple to $1.03 trillion in three years. The report concurred with other sources that the renminbi has been moving closer to becoming a global reserve currency. There are only three economies that follow the US dollar more closely than they do the yuan – Hong Kong, Vietnam and Mongolia.

China’s Yuan and Global Economy

Asia, and especially China, has become an increasingly valuable cog in organizations like the International Monetary Fund and numerous global markets. Financial institutions and traders recognize that China’s financial and political health are integral for global economy.

The yuan, China’s currency, has increased against the dollar reaching a record high. Many financial experts believe this could have serious impact on both Chinese and global economy.

Is one financial insider said, in an interview with AdvisorOne earlier this year,

“There is a $30 billion a month in foreign currency sent to China through trade… That $30 billion could add to the liquidity of the Chinese economy by appreciating it further and making imports more expensive. That action will cause importers to buy more by paying in foreign currency, and that causes Chinese foreign product exports to drop due to their greater cost.”