The value of cross-border trade via the Chinese currency renminbi (RMB), or yuan, totaled 3.27 trillion yuan (531.15 billion U.S. dollars) in the first half of 2014, up 1.22 trillion yuan year on year, latest data from China’s central bank showed.
Analysts said the fast rise of the yuan in cross-border trade is closely related to the growth of the offshore RMB markets overseas.
Since this year, the Chinese central bank has signed memoranda of understanding with five other central banks on launching yuan-clearing business, with the Bank of Communications becoming the latest bank authorized as the clearing bank for RMB business in Seoul. The other arrangements were agreed in Europe’s London, Paris, Frankfurt, and Luxembourg.
“The RMB clearing arrangements in Europe have certainly drawn much attention, but it is because there is a massive market demand out there,” said Wu Bin, general manager of the international business department under the Industrial and Commercial Bank of China, China’s biggest bank.
Government data showed bilateral trade between China and Europe hit almost 730 billion U.S. dollars in 2013, up 6.9 percent year on year. Meanwhile, Europe currently accounts for more than 10 percent of the yuan’s cross-border trade settlement worldwide, second only to Hong Kong.
Global payments in yuan have continued to expand since China launched yuan settlement for cross-border trade in 2009. Data showed the Chinese currency accounted for 1.62 percent of global payments by March, ranking seventh worldwide.
Despite the yuan’s climb, it still lags behind the U.S. dollar and the euro in global acceptance. “In order to make the yuan become a mainstream settlement currency globally, we have to make overseas investors willing to hold yuan products,” said Huang Zhiling, chief economist of the China Construction Bank.
Huang said that the establishment of yuan clearing banks is an important step by China to promote the global reach of its currency, but it is just the beginning.