Following the news from SWIFT that China’s yuan overtook the euro as the world’s second most-used trade finance currency in October, HSBC has predicted that over half of China’s trade with the emerging markets will be settled in RMB over the next five years.
“The significance of the RMB in trade is undoubtedly growing and is only going to increase in pace,” says Noel Quinn, group general manager and regional head of commercial banking for HSBC Asia Pacific. “In the next 5 years we expect the RMB to be fully convertible and have forecast that over half of China’s trade with emerging markets will be settled in RMB in that time. However, the vast majority of businesses outside of Greater China still haven’t taken full advantage of the RMB for cross border transactions. As the internationalisation of the RMB gathers pace, businesses must start preparing to unlock the potential of the RMB in international trade.”
The market share of the yuan in trade finance increased from 1.89% in January 2012 to 8.66% in October 2013. The yuan now ranks behind the US dollar, which remains the leading currency with a market share of 81.08%. SWIFT said that the top five countries and regions using the yuan for trade finance in October were China, Hong Kong, Singapore, Germany, and Australia. The yuan remained the twelfth payment currency in the world, with its market share down slightly from 0.86% in September to 0.84% in October. The value of payments in yuan increased 1.5% in October, while all payment currencies grew 4.6% during the same period.
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