In March, the Chinese yuan was praised as being the most frequently used currency in China for international transactions. This article demonstrates that the Chinese yuan has truly surpassed the dollar for the first time. This assertion is based on official data that reflects Beijing’s efforts to internationalize the use of the yuan.
On the other hand, it was noted that yuan cross-border payments and receipts increased to a record $549.9 billion in March from $434.5 billion the previous month. This information was calculated by Reuters using data from the State Administration of Foreign Exchange.
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Chinese Yuan on the Rise
Chinese yuan was used in 48.4% of all cross-border transactions, according to Reuters’ calculations, while the US dollar’s share was perceived to have decreased to 46.7% from 48.6% a month earlier. The volume of cross-border transactions encompasses both the current and capital accounts, it is important to note.
Despite the current success of the Chinese yuan, it is important to remember that China has long promoted using the yuan to settle international trade as part of its efforts to internationalize the usage of its currency.
Yuan has been in the news a lot lately because of its steady rise, yet it is still rarely used to finance international trade. On the other hand, according to SWIFT data, the dollar accounted for 83.71% of all international currency transactions for trade financing in March, while the yuan’s share increased to 4.5%.
Dollar Remains Dominant
It is anticipated that any concerns of currency mismatches will be reduced by the aforementioned rise in reliance on the yuan. In light of this, China’s State Council is promoting an increase in the usage of the renminbi for international trade.
However, despite this cooperation, it is thought that the dollar still holds a sway outside of China’s boundaries. Reuters’ revelation that the yuan’s proportion of global currency transactions for trade finance was only 4.5% in March compared to the dollar’s 83.7% share is a good illustration of this situation.
Despite this, it was seen that the yuan had continued to gain ground, particularly in light of the Western sanctions that had frozen Russia’s foreign exchange assets and made holding dollars more dangerous. Additionally, China has already signed non-dollar trade agreements with nations like Brazil.
It is also important to note that since Moscow was essentially cut off from international money following its invasion of Ukraine last year, the yuan has surpassed the dollar as Russia’s most traded currency.
Despite the fact that the yuan has just overtaken the dollar in value, most observers still think that the dollar will continue to rule the world’s markets for the foreseeable future because the yuan is subject to too much Chinese government control.