China’s yuan has become the fifth most used currency for international payments, passing the Canadian and Australian dollars in just two months.
Payments coordinator Swift said on Wednesday that 2.2 per cent of payments in December were in yuan, placing the currency just behind the Japanese yen, which makes up 2.7 per cent of Swift payments.
The Chinese government has made several changes as part of a drive to have the yuan recognised as major global currency, which have resulted in the rise of various offshore RMB clearing centers around the world, thanks to eight new agreements signed with the People’s Bank of China in 2014.
The yuan was used for a quarter of all payments across China’s borders in 2014, The Wall Street Journal reported. In a 2013 statement, largely seen as a blueprint for Xi Jinping’s presidency, policy makers set an explicit goal of opening up cross-border capital flows and accelerating exchange rate reform. Despite the lack of a specific timetable, the country is gradually relaxing its hold over the exchange rate. Since last year, the government has let it fluctuate slightly in a range of 2 per cent above or below the benchmark set daily by the central bank, compared with 1 per cent previously.
China has also signalled that it plans to remove barriers restricting the movement of investment funds in and out of the country in the long run. For now, companies are free to use the yuan to pay for traded goods.
The US dollar, Euro and British pound still hold the top three places, with the dollar dominating 44.6 per cent of all Swift payments. The Euro makes up 28.3 per cent and the pound 7.9 per cent.
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