China’s push to promote the yuan in the international market is starting to take root.
The yuan accounted for 8.66% of letters of credit and collections used in global trade finance in October, second only to the dollar and surpassing the euro’s 6.64% share, the Brussels-based Society for Worldwide Interbank Financial Telecommunication said in a statement yesterday.
China is seeking a greater role for the yuan in global trade and investment, loosening controls as part of its once-in-a-generation economic overhaul last month and signing agreements to trade the currency more freely with financial centers from London to Singapore. The world’s second-largest economy may grow 7.6% this year, compared with an average 1.09% for the Group of 10 developed nations, Bloomberg surveys show.
“The yuan is on the way to become a truly, truly gigantic market,” David Simmonds, the head of currency and emerging- market strategy at Royal Bank of Scotland Group Plc in London, said in a phone interview yesterday. “Volumes will continue to grow with the evolution of the offshore market and with broader liberalization.”
The People’s Bank of China outlined plans last month to end daily currency intervention as China’s ruling Communist Party attempts to modernize the economy. HSBC Holdings Plc predicts the currency, which climbed to a 20-year high in October, will be the main tender of international trade after the U.S. dollar and euro by 2015.
“Overseas exporters are using the renminbi more as the contract currency to increase the attractiveness and competitiveness of goods or services sold to China,” Cynthia Wong, the Hong Kong-based head of emerging-market trading for Singapore and Hong Kong at Societe Generale SA, said in an interview.
China announced agreements this quarter to start direct currency trading between the yuan and both the British pound and Singapore dollar. Direct trading with the yen and Australian dollar started in the past two years. The European Central Bank and PBOC agreed in October to establish a bilateral currency swap line of as much as 350 billion yuan ($57.5 billion).