According to data from China’s State Administration of Foreign Exchange (SAFE), China’s RMB Yuan overtook the US dollar to become the most-used currency in the country’s cross-border transactions in the month of March 2023.
Based on calculations by the State Administration, cross-border payments and receipts in RMB Yuan increased significantly from approximately $434.5 billion in February 2023 to a record high of $549.9 billion in March 2023, and represented 48.4% of all such transactions. This reflects a trend of moving away from the US dollar and China’s push to encourage the use of its currency.
According to SAFE, the volume of cross-border transactions in RMB Yuan includes both current and capital accounts.
While the RMB Yuan’s share in global settlements is still relatively low, it has been steadily increasing over the past few years.
Global cross border transactions by currency:
* U.S 🇺🇸 Dollar: 83%
* Chinese 🇨🇳 Yuan: 4.5% pic.twitter.com/DYyPsaNsME— BitKE (@BitcoinKE) May 1, 2023
Big financial institutions like Citigroup and Goldman Sachs, however, have predicted that by 2030, Yuan will become the 3rd most used currency in international payments.
China’s efforts to reduce its reliance on the US dollar in international trade are said to have accelerated due to the sanctions imposed by Western countries against Russia, a significant global energy producer and exporter. These sanctions have disrupted global trade flows and increased the risk of financial transactions denominated in US dollars prompting China to seek alternatives.
China is not alone in these efforts, with its partners in the BRICS group of countries having taken similar measures to boost cross-border trade using their currencies. Recently, Russian President, Vladimir Putin, and Chinese President, Xi Jinping, agreed to adopt the Chinese Yuan as a settlement currency with emerging economies.
Indian policymakers have also taken steps towards shifting away from the U.S dollar to Russian Rubles and Indian Rupees in mutual trade with Moscow.
China and Brazil have also agreed to use their own currencies to settle trade over the dollar.
In March 2023, Egypt’s Parliament gave the green light for the country to join the BRICS Bank, also known as the New Development Bank, with lawmakers viewing it as a means of reducing reliance on the US dollar.
The 5 countries which include Brazil, Russia, India, China, and South Africa are also working on a new currency with details set to be unveiled at an upcoming summit meeting to be held in South Africa in August 2023, a senior Russian official has revealed.
The latest data from the Bank of Russia shows that the RMB Yuan has also become a major player in Russia’s foreign trade and now accounts for more volumes than either the U.S dollar or Euro on the Moscow currency exchanges.
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