Yuan rises to 13th as payment currency

Updated: 2013-02-28 11:41

By Michael Barris in New York (China Daily)

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Growing demand has led China's yuan to overtake the Russian ruble as a currency used for global payments, according to SWIFT, a messaging system used by international banks.

SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, said on Wednesday that use of the yuan in January jumped 24 percent from December, enabling it to capture 0.63 percent of global payments, an all-time high. That made it the 13th most-used currency overall, ahead of the ruble and Danish krone, according to SWIFT.

A year ago, the yuan was used in 0.25 percent of all global payments, putting it 20th among currencies. The year-on-year increase in use of the yuan for payments, as measured by transaction value, was 171 percent.

In contrast, use of the ruble in January declined 5.4 percent from December. While its share of global payment market was 0.56 percent, up from 0.52 percent in January 2012, the ruble fell to 15th place among currencies from 14th a year ago. Denmark's krone displaced the ruble, sliding into 14th from 13th.

The Hong Kong dollar moved into ninth place, with 1.02 percent of global payments, up from 0.95 percent and the No 10 spot a year earlier.

For China, the SWIFT report affirms that becoming the world's second-biggest economy has sparked greater use of its currency. For instance, the yuan is used for business transactions in Hong Kong, Singapore and Australia. Meanwhile, derivatives-exchange operator CME Group Inc this week began to offer yuan-denominated foreign-exchange futures contracts in Hong Kong. In another step up for the currency, in January the private equity regulator for the Chinese mainland began allowing overseas yuan capital to boost private-equity investments.

James Wills, a senior business manager for SWIFT, said in an interview that the yuan is "slowly increasing" its share of the world market.

"But it's a very young currency in this marketplace and it takes many, many years to establish a currency," he said.

In recent years, the yuan, also known as the renminbi (RMB), has seen "very steady, very constant" growth in global payments, Wills pointed out. "It would be a natural expectation that the RMB is going to be a very important currency, and continue to grow as an important currency."

By loosening its grip on the country's capital account, the Chinese government has given foreign investors, manufacturers and traders greater incentive to hold yuan for investment or payment settlements, according to Gregory Chin, head of China research at the Centre for International Governance Innovation, a Canadian think tank. Increasing use of the yuan has compelled Daniel Hwang, chief currency strategist at Gallant Capital Markets in New York, to predict that US payments in yuan will increase this year.

Wills suggested that the yuan would increase its stature even further if it were adopted as a global benchmark for the commodities market.

"You have a lot of commodities that are denominated in non-RMB - US dollar for petroleum, [Britain's pound] sterling for some metals," he said. "The RMB is not used as a global benchmark for a lot of commodities. And over time, if that changes, then you will see more activity in the RMB."

According to SWIFT, a Belgium-based, member-owned cooperative, the euro remains the leading world-payments currency, accounting for 40.17 percent of transactions, down from 44.04 percent a year ago.

Following the euro are the dollar (33.48 percent, up from 29.73 percent in January 2012), the British pound (8.55 percent, down from 9 percent) and the Japanese yen (2.56 percent, up from 2.48 percent). Next are the Australian dollar, Swiss franc, Canadian dollar, Singapore dollar, Hong Kong dollar, Thai baht, Swedish krona, Norwegian krone and the yuan.


(China Daily 02/28/2013 page7)