Perhaps more important than the renminbi’s steady rise as global payments currency – now standing at 16th most-used payment currency, according to Swift’s monthly RMB tracker – is the Chinese currency’s rising prominence for trade finance. “The renminbi now has a 4% market share in the global issuance of letters of credit by value,” says Wim Raymaekers, head of banking markets at Swift. “This makes it one of the world’s top-three currencies in this space – it’s quite an Olympic achievement.”
The US dollar remains by far the dominant currency for this type of trade finance, with an 84% market share, but it is noteworthy that the Chinese renminbi outpaces the Japanese yen (1.9%) and is not far behind the euro (7%) by overall value of transactions.
RMB is 3rd biggest currency in global |
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Source: Swift |
Swift’s data show that the use of renminbi for the issuance of letters of credit is concentrated heavily in Asia. Well over 50% of all letters of credit in transaction value were sent by banks in China to Hong Kong, with nearly 20% going from China to Singapore.
Letters of credit denominated in renminbi between China and EMEA account for just over 4% of all transactions by value, and for the Americas this figure is closer to 2%.
Top RMB corridors for lettters of credit |
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Source: Swift |