A staff member displays the banknotes and coins included in the 2019 edition of the fifth series of the renminbi at an Industrial and Commercial Bank of China (ICBC) branch in Beijing, capital of China, Aug. 30, 2019. (Xinhua/Chen Yehua)
BEIJING, Feb. 20 (Xinhua) -- Renminbi (RMB), the Chinese currency, has embraced a good start in international payments in 2021.
According to the latest data from the Society for Worldwide Interbank Financial Telecommunications (SWIFT), a non-profit international cooperative organization, RMB remained the world's fifth most active currency among global currencies based on payment amount in January this year, accounting for 2.42 percent of the total.
Data also showed that during that month, the RMB payments increased by 21.34 percent in total as compared with that of December 2020, while payments in all currencies totally decreased by 5.86 percent in the same period.
Insiders believe that the good start of RMB international payments has not only shown the enhanced willingness of global investors to hold and use RMB, but also signaled encouraging progress in RMB internationalization.
-- Multiple factors drive demand
The strong trade demands for Chinese products around the globe and the steady trend of RMB value have fueled the huge increase of the global payments of RMB.
China's imports and exports have increased and so have the global imports of Chinese products since the second quarter of 2020, giving Chinese companies a greater say in requiring counterparts to use yuan for payment and settlement and leading to the expansion of RMB payments in total amount and proportion, said Lian Ping, chief economist with Zhixin Investment Research Institute, a think tank based in Shanghai.
In Lian's opinion, affected by the COVID-19 pandemic, the imports and exports of a large number of economies were stagnant or semi-stagnant in 2020, and this is the main reason why global payments in all currencies are shrinking as a whole.
In 2020, the scale of the goods trade and the international market share of China both hit a record high, and the country was the only major economy in the world that achieved positive economic growth, data released by the General Administration of Customs (GAC) in January showed.
Besides, the steady value of RMB has further promoted its global use. In 2020, the RMB rose by 6.2 percent, and the increase was in the middle globally.
Since May 2020, RMB has steadily appreciated in two-way fluctuations, making global investors more willing to hold and use the currency, said Lian.
-- RMB's value displays in multiple fields
Apart from cross-border payment, RMB has also shown its value in official foreign exchange reserves, cross-border capital flows, trade valuation and settlement, and other respects in international finance.
In the global official foreign exchange reserve structure, the scale of RMB reserves continues to climb.
According to the latest Currency Composition of Official Foreign Exchange Reserves (COFER) released by the International Monetary Fund (IMF), by the third quarter of 2020, the total RMB foreign exchange reserves rose to 244.52 billion U.S. dollars, achieving seven consecutive quarters of growth, and the share of RMB among global foreign exchange reserves also rose to a new high of 2.13 percent.
RMB has also gradually played a major role in cross-border capital flows.
The usage ratio of RMB in cross-border capital flows had grown from 26 percent in 2019 to 36 percent in 2020, said Li Wei, a senior economist with Standard Chartered Bank (China) Limited, adding that this is closely related to the internationalization or the wider acceptance of RMB.
Li noted that there will be more channels for overseas investors to allocate RMB assets in the future, such as the Shanghai-Hong Kong Stock Connect and the Bond Connect.
"Therefore, in terms of actual cross-border flows, the RMB share is going to rise a lot more," said Li.
As for RMB trade valuation and settlement, more landmark events emerged in 2020.
The world's top three iron ore giants, BHP Billiton, Rio Tinto Group and Vale, all used RMB for settlement in iron ore trade with China.
Turkey started to use RMB to settle Chinese imports.
The international copper futures denominated and settled in RMB were listed in the Shanghai International Energy Exchange.
-- RMB internationalization stands at an important historical pass
Insiders believe that the outstanding performance of the Chinese economy will bolster the further use of RMB, and in the long run, RMB internationalization is at an important historical juncture.
On the one hand, the U.S. dollar's share in reserve assets and global payments is continuing to decline.
According to the latest data from IMF, in the third quarter of 2020, the U.S. dollar's share in global foreign exchange reserves had fallen to 60.4 percent, the lowest level since 1995.
The selling of U.S. dollar assets by overseas institutions continues unabated.
According to the monthly international capital flows report released by the U.S. Department of the Treasury on February 16 local time, in December 2020, the amount of U.S. debt held by overseas investors had declined to 7.0361 trillion U.S. dollars, and this was the fifth month in a row that overseas investors had sold U.S. debt.
On the other hand, China has accelerated the expansion of opening-up and greatly improved the facilitation of cross-border trade and settlement of RMB.
Under the combined effect of the completion of the negotiation of the China-EU investment agreement and other factors, the internationalization of RMB will embrace more development opportunities.
For example, there are more expectations in the market for a further increase in the share of RMB payments, including transformation and upgrading of trade modes, policies to encourage RMB payments in exports, more open capital accounts, etc.
Efforts can be made to increase the frequency of the use of offshore RMB by developing offshore trade and intermediary trade, encourage exporters to accept RMB as a means of payment, and further expand financial opening-up and reform under RMB capital in free trade zones to improve the willingness of global economic entities to hold and use RMB, said Lian Ping.
The increase in the share of RMB payments ultimately depends on more open capital accounts, and thus greater capital inflows and outflows should be allowed, said Wang Dan, chief economist with Hang Seng Bank China, adding that financial markets are particularly important.
(Edited by Gu Shanshan with Xinhua Silk Road, gushanshan.1987@163.com)
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