There is ample opportunity for China and Japan to promote their
domestic currencies for bilateral trade settlement, a study by the Society for
Worldwide Interbank Financial Telecommunication (SWIFT) concludes.
This month’s SWIFT RMB Tracker reviews payments between the two
countries following the start of direct trading between their currencies at the
end of May, and suggests that there is plenty of opportunity for the world’s
second and third-largest economies to promote their respective currencies,
since the majority of payments between them are currently done in a third
currency, namely the US dollar.
SWIFT notes that the US dollar is currently the most-used currency
between China/Hong Kong and Japan, with a 52.4% share in customer-initiated payments
in May 2012. The Japanese yen was second, with a 43.9% share, followed by the
Hong Kong dollar with 1.6%, the Chinese renminbi (RMB) with 1.3% and the euro with 0.4%.
From Japan’s perspective, the yen is used in 54.3% of exports to
China/Hong Kong and payments received by Japan, and 35.0% for imports/payments
sent by Japan. Overall, the RMB was only used in 1.3% of customer initiated
payments between China/Hong Kong and Japan.
SWIFT RMB Tracker suggests that to further develop the internationalisation
of the RMB, China should look beyond Japan. It adds that “ Europe, the rest of
Asia, and also North America (US, Canada) – which represents nearly 60% of
all China/Hong Kong’s customer initiated payments and where RMB adoption is
currently below 1% – offer great opportunities.”
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