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Renminbi Series: Yuan’s share in global payments declines in August
The Chinese yuan has been steadily losing its attraction, according to a report by Swift payment system. As an effect of economic stagnation, uncertainties, higher volatilities and surprised devaluation of the yuan in August last year and large depreciation in January this year, it’s losing its stature in the global payment system. The happening remains in contrary to the popular expectations that after inclusion of the yuan in International Monetary Fund’s (IMF) Special Drawing Rights (SDR) basket will increase its popularity in global payments.
Recently, several of major global institutions such as the Bank of International Settlements (BIS) has warned against the banks of China, especially on how highly leveraged economy could call forth a crisis.
Rise of the yuan:
Yuan rose sharply into prominence post-financial crisis, which finally led IMF to recognize its claim to be included in SDR basket.
- Back in January 2012, Yuan first entered among the 20 most used currency in transactions, accounting for just 0.25% of all transactions.
- And in January 2013, Yuan rose to rank 13th among currencies most used for global payments, accounting for only 0.63% of all transactions. By January, 2014, it rose further to 7th position, surpassing currencies like Swiss Franc, Hong Kong Dollar, accounting for 1.39% of all global FX transactions.
- According to data from SWIFT, by August 2015, Yuan’s rank improved to fourth surpassing Japanese Yen and accounting for 2.79% of all global transactions.
Decline in popularity –
Surprised devaluation of Yuan in August and fear of hard landing is doing the damage to the yuan, whose rank is slipping in currency payment system, according to SWIFT data.
- After Surpassing Yen by August, 2015, the yuan’s position slipped to fifth after USD, EUR, GBP and JPY, accounting for 2.31% of all transactions.
- According to data in March, Yuan’s share in global transactions dropped to lowest since October 2014 to 1.76%. In June, it was 1.72 percent.
- In last August, the yuan was the fourth most used currency in the world in global transactions, it now ranks as sixth. Though, the share recovered in July from the trough of June, it has slipped to 1.86 percent in August.
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