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Yuan Rising: China Surpasses Japan To Claim Number Four Spot In Most Used Global Currencies
Bungled efforts to mark a “managed” transition to a new currency regime notwithstanding, China seems generally to be doing a decent job of gradually paving the way for a world in which the yuan plays a far greater role in global trade and investment.
That is, if we look beyond the recent FX market turmoil, the picture that emerges is one in which China has managed to convince Russia to settle oil imports in renminbi and in which the AIIB and Silk Road funds are set to help establish the yuan as the funding currency for billions in development projects.
While we may still be years away from the fabled “yuan hegemony,” we got still more evidence on Tuesday that despite the currency’s rather uncertain medium-term trajectory and despite a still closed capital account, China is moving ever closer to establishing the RMB as a reserve currency. Here's WSJ:
In August, for the first time, the yuan moved ahead of Japan’s yen for fourth place in a league table of the most-used currencies for cross-border payments compiled by Swift, the international payments provider.
A “substantial” increase in usage of the currency in the final week of August was triggered by market volatility caused by concerns about the Chinese economy and Beijing’s devaluation of the yuan, Swift said in a report.
the Chinese currency has been gaining traction. As recently as August 2012, the yuan was ranked No. 12 on Swift’s list with just a fraction of its current share of the global payments market.
Astrid Thorsen, head of business intelligence solutions at Swift, said volatile Chinese markets spurred greater use of the Chinese currency, especially toward the end of August.
China’s yuan recorded its biggest one-day loss in two decades in August after the country’s central bank surprised markets by devaluing the currency. The yuan had been strengthening for about a decade before the move, which Beijing said was meant to help shift the currency toward a more market-driven model.
The devaluation was also viewed by many investors as a sign of growing concern among Chinese authorities about the state of the country’s economy, helping to fuel fears of a slowdown.
The volume of foreign exchange trades in yuan hit more than 1 million for the first time in a single month in August, rising 50% from the same period last year and up 20% from July, “likely due to the devaluation…by the People’s Bank of China,” the Swift report said.
“Trading [in yuan] was almost nonexistent five years ago but today ranks amongst the most traded currencies globally,” said Chris Knight, head of electronic trading for Asia at Standard Chartered Bank.
“Given China’s role as a regional and global business hub at the center of economics and commerce, it has become critical for us to trade [it].”
Here’s Bloomberg with more:
China’s yuan overtook Japan’s yen to become the fourth most-used currency for global payments, shrugging off a surprise devaluation to rise to its highest ranking ever and boosting its claim for reserve status.
The proportion of transactions denominated in yuan climbed to a record 2.79 percent in August, from 2.34 percent in July, according to a Society for Worldwide Interbank Financial
Telecommunications statement on Tuesday. It was second for global issuance of letters of credit by value with a 9.1 percent share, compared with 80.1 percent for the U.S. dollar.
The report comes as the International Monetary Fund prepares to conduct a twice-a-decade review of its Special Drawing Rights basket, which currently comprises the U.S. dollar, euro, yen and the British pound. China has been pushing the yuan’s case for inclusion, which Standard Chartered Plc estimated could trigger as much as $1 trillion of inflows into the currency. The People’s Bank of China on Aug. 11 devalued the yuan reference rate by 1.9 percent and switched to a more market-oriented fixing, spurring a 2.6 percent slide in the currency in August.
"The data are positive for the probability of the yuan getting into the SDR basket," said Nathan Chow, an economist at DBS Group Holdings Ltd. in Hong Kong who predicted in January that the currency would surpass the yen in global usage this year. "It shows that the so-called devaluation in August, which wasn’t massive in value, hasn’t driven people away from using the yuan."
And that shouldn't come as a surprise. As difficult as it sometimes is to look beyond today or tomorrow's crises, and as challenging as it will most assuredly be for China to successfully transition to an economic model led by consumption and services as opposed to investment and infrastructure spending, the market is still forward-looking and apparently, quite a few people still see a brighter future for Beijing and the paper they print than for Washington and "king" dollar.
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Heh heh.....don't everyone rush to go first here.
They went back to sleep to pick up where that nightmare left off.
I see the Lone Junkster found his way here from Huffpo.
I keep deleting his favorites....I don't know how he does it.
"First you had records, cassettes and CDs, managers, lawyers and now the Chinese !"
Of course they own us.
Even when it hits number one the Fed, sorry IMF, will still find a reason to decline its inclusion.
actually it's not the IMF that declines the inclusion of the Chinese currency to the SDR basket. it's the US Congress
and so the US Treasury Secretary and the FED chairwoman, who vote on behalf of the US in the IMF are completely alone in their "NO"
blocking any reform for which all the others have since a while a consensus
but... the US has a veto, thanks to the statutes of the IMF regarding how much of it's shares give veto power. and for that reason any reform has to be blocked, then the US Congress is neither willing to increase the US share (speak: cough up more dough) nor to allow that "emerging economies" buy more shares at the cost of losing that veto power
ghordius welcome back from greece, how did that work out?..a slight misunderstanding of us .gov..the sec of treasury works for the banks and wall st, the us congress is now powerless, the curtain for those who run our .gov to hide behind..there is no us congress and senate. shocking no?
Greece could have been worse... or way better. but it's Greece, always worth a visit. godchildren made me proud, and there is no satisfaction that exceeds that
44.8% U$D vs. 2.8% yuan! Who the fuck is doing all the promotion of a Chinese reserve currency. That dinosaur, British pound sterling, should be their target to overtake --- w/in the next f'n 15 years!!!
Reserve currency! HA!HA!HA!HA! We're #4!, We're #4!, We're #4!!!
Do you believe in miracles?
No, when the revaluation comes it will be sudden and drastic.
Got gold?
One word to consider. Demographics.
We don't need no IMF BIS SDRS basket of BS no more than we need the Saudi Mercan I$I$ "backed" €urodollah toilet paper muck clogging the Wall Streeters Ponzi outhouse in the Potemkin Village "economy" of the USSA.
Onward then post haste to the NEW improved new world order, sans the Anglozionazi Empire of Chao$!
I see a baaad moon arisin'.
I see trouble Honda way.
I see earthquakes and lightnin'.
I see baaad times today.
Fuckushima!
Which currency was 8th in 2012, 10th in 2013 and totally off the chart today?
Somewhat serious question to you real world guys.
I can read explainations all day long of Yuan vs Renminbi terminology,
http://ghi-dc.org/index.php?option=com_content&view=article&id=405&Itemi...,
But the common label of yuan is prevalent.
I find 'yuan' easier to use myself, any insight from guys that actually trade this market would be very enlightening to me.
I've been to China many times and my understanding s that renminbi (ren means people and bi means coin) is the official name of the currency but yuan means a unit of that currency. But when you're speaking chinese you say kuai (sounds like bridge over the river kwai). So I think you would write eg 10 yuan but say 10 kuai. You wouldn't say 10 renminbi.
Thanks,
I find all Picto writing difficult, never mind decyphering any subtle meanings that can only come from a lifetime of living there.
The characters kill me. I can speak chinese pretty well but 90% of the characters don't have any visual association to the words they represent. So it's just a somewhat random pattern of strokes. At first the only way to remember them is to learn the simple characters and the more complex characters are often combinations of the simple ones. By the time they're 12 most chinese kids know 2000 characters. No wonder they think written english is so simple. And no wonder they're great at certain branches of math.
I try to use the original source material as much as possible, but to me Asian languages remain inscrutable.
How's that for a racial, bigoted remark, eh?
"How's that for a racial, bigoted remark, eh?"
It's a black day for political correctness.
Here they come. All thanks to "Free" Trade. Thanks UNCLE SHAM! The price the American people will pay for free? immeasurable.
I keep lots of debt, debt is the world reserve currency..the more debt you have the more currency you have, Am I not right bernake?? ben ? Alan? mr Yellen??..everyone of us must take on debt to save the banks. I need that 4th car, a boat and new iphone..buy for your .gov take a loan today!!
This is the Sum of Washingtons best thinking!
Is there any way to track the global velocity of the yuan. Trade is the only thing that matters. period. How much of the global trade is done in yuan? We all know that the velocity of the dollars in circulation is shit, but what is that relative to the yuan?
I vote for the first currencies to go back to the Gold Standard....Imagine a BITCOIN(though I have a feeling BITCOIN is FRAUDABLE)/GOLD STANDARD
a gold standard implies trust. in a counterparty that is supposed to cough up the gold on demand
at the same time, less trust then what the current fiat currencies... currently enjoy. including bitcoin
you see the paradox?
Horse puckey. Its not "the 4th most used", its "the 1st most printed". Get your story straight ZH.
eh, it's bullshit. china is gaming the stats as they always do. it's not widely held or widely used outside of their little bubble. a handful of deals denominated in RMB does not a global currency make. SDR is never happening, China already blew that dream.