Europe now represents 10% of renminbi payments worldwide in value, according to SWIFT data. Between July 2013 and July 2014, European payments directly exchanged with China and Hong Kong in RMB increased by 105%.
Over the past year, four European countries have been settling into the top 10, excluding China and Hong Kong. The UK leads Europe with 123.6% growth between July 2013 and July 2014, followed by France (+43.5%), Germany (+116%) and Luxembourg (+41.9%).
“For most of these European hubs, Greater China still remains the main trading partner in RMB”, said Michael Moon, head of payments and RMB, Asia Pacific at SWIFT. “However, there seems to be a noticeable shift in business for some countries like Luxembourg, with an increasing share of truly offshore flows (e.g. no Greater China leg). In the future, we should see a bigger contribution from truly offshore flows in the internationalisation of the Chinese currency”.
Moon added that over the past year, Chinese authorities and financial institutions made certain European countries official clearing centres for the RMB, which has boosted RMB trading activity. “After the United Kingdom and Germany, we may see similar trends happening in France, Luxembourg and even Switzerland,” he said. “Announced in July, the bilateral currency swap agreement between the People’s Bank of China and the Swiss National Bank could put Switzerland in line to become a new RMB hub in Europe.”
Vina Cheung, HSBC’s global head of RMB internationalisation, payments and cash management, sees the increase in RMB payments between Europe and Greater China as “extremely encouraging news” for European businesses and governments. “It shows businesses are seizing the opportunity presented by China’s currency liberalisation programme to deepen their commercial relationships in the world’s second largest economy,” she said. “It also shows government efforts to build hubs for RMB trading and investment in Europe are starting to bear fruit.”
Overall, the RMB strengthened its position as the seventh most used global payments currency and accounted for 1.57% of global payments. In July 2014, RMB payments grew in value by 3.0% compared to June 2014. At a global level, all currencies increased in value by only 2.0% in the same month.
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