The United Arab Emirates (UAE) and Qatar are the most active Middle East countries using the Chinese renminbi (RMB) for direct payments with China and Hong Kong, according to data from SWIFT.
The financial messaging services provider reports that in 2015, the UAE’s use of the RMB accounted for 74% of payments by value to China and Hong Kong – an increase of 52% from 2014. The Chinese currency was used for 60% of all payments in Qatar, representing a year-on-year (YoY) increase of 247%.
However, the majority of payments between the Gulf States and China and Hong Kong continue to be in US dollars (USD) and are subsequently intermediated, mainly by USD clearing banks, the report added.
“The use of the RMB has been rising across the Middle East region over the last few years,” said Sido Bestani, SWIFT’s head of Middle East, Turkey and Africa.
“Adoption has been supported by developments such as the establishment of an RMB clearing centre in Qatar last year – the first in the Middle East – and the recent memorandum of co-operation signed between the People’s Bank of China (PBOC) and the UAE Central Bank to set up RMB clearing arrangements in the UAE.”
In addition, last month, the UAE renewed a RMB35bn (US$5.42bn) currency swap deal with China during an official visit by Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed Al-Nahyan to Beijing.
“We anticipate these and similar efforts will continue to drive RMB adoption across the region,” said Bestani.
SWIFT’s latest monthly report showed the RMB as the fifth most active currency for global payments by value in December 2015, accounting for 2.31% of global payments in December 2015 – up from 2.28% in November.
“The volume and value of trade between the Middle East, China and Hong Kong is fast expanding,” said Vina Cheung, HSBC’s global head of RMB internationalisation, global payments and cash management, Asia Pacific.
“In the last two decades bilateral trade has increased more than fifty-fold. As these ancient Silk Road routes reawaken, we expect more Middle Eastern companies to turn to the renminbi to settle trade payments.”
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