Can the Yuan Maintain Its Momentum in a Changing Global Market?
The Chinese yuan (CNY) has firmly secured its place as a major player in global finance, maintaining its rank as the fourth most active payment currency worldwide. According to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the yuan's share of global payments by value reached 4.74% in July 2024, marking its ninth consecutive month in the top four. This milestone highlights not only China's economic resilience but also the yuan's expanding international role.
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Steady Gains and Record Growth
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SWIFT data shows the yuan's global payment value grew by 13.37% in July, outpacing the overall global growth rate of 10.29%. This steady climb aligns with China's broader financial reforms and its commitment to promoting the yuan's role in international trade. In trade finance, the yuan has edged past the euro, capturing a 6% market share, underlining its growing adoption in cross-border transactions.
Key initiatives by the People's Bank of China (PBC)—such as bilateral agreements with 42 foreign central banks—continue to boost yuan liquidity and market confidence. For example, a recent memorandum signed with Vietnam's State Bank aims to streamline cross-border payments and local currency settlements, reinforcing regional financial ties.
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Macro-Economic Resilience Fuels Momentum
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The yuan's steady ascent reflects a mix of macroeconomic strength and strategic financial policies. China's stable growth, underpinned by supportive fiscal and monetary measures, has bolstered the yuan's credibility as a reliable currency. By focusing on exchange rate stability, gradual market liberalization, and increasing offshore yuan liquidity, Chinese policymakers have fostered a balanced path to internationalization.
Hong Kong remains the dominant hub for offshore yuan transactions, accounting for 76.18% of all yuan-denominated deals, followed by the UK (6.16%) and Singapore (3.76%). The expanding offshore markets ensure global investors have access to yuan-based assets, further solidifying its role in international finance.
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Strategic Steps Toward the Future
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China's cautious yet consistent financial reforms signal a clear intention: to position the yuan as a dependable and accessible global currency. Efforts to streamline payment infrastructure, expand bilateral trade mechanisms, and support offshore yuan liquidity are gradually reshaping the financial landscape.
At the same time, central banks worldwide are responding to this shift. A UBS survey reveals that 70% of central banks are now investing in or considering increasing yuan-denominated assets—an acknowledgment of China's economic strength and growing influence.
As international markets become more diversified, the yuan's role will continue to grow, offering new options in an increasingly multipolar financial system.
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