China’s currency, the yuan, gains traction in cross-border settlements
In recent months, the yuan’s role in cross-border transactions has surged, with data showing a pronounced rise in its use across China’s international payments. This trend is highlighted by figures from the State Administration of Foreign Exchange of the People’s Republic of China (SAFE) and reported by major financial outlets. The shift reflects a broader push toward currency diversification in global trade and finance, alongside evolving geopolitical and policy factors that shape settlement patterns.
SAFE reports that in July, 53% of China’s total inbound and outbound transactions were denominated in the yuan, up from a 2021 baseline by about 13 percentage points. The composition of these flows is broad, encompassing goods and services trade agreements, but it also includes investment movements and debt settlements. Analysts see the data as a signal of sustained progress in charters for yuan-denominated finance, even as the currency’s global share remains modest relative to leading reserve currencies. These trends align with ongoing policy aims to deepen financial openness while managing domestic macroeconomic priorities.
The ascent of the yuan in international payments has been cushioned by broader geopolitical events. A shift in payments patterns followed the start of a special military operation in Ukraine and subsequent sanctions that constrained Russia’s use of the dollar in certain transactions. In early 2023, remarks from Elvira Nabiullina, the head of Russia’s central bank, described a notable uptick in yuan usage for payments, financial transactions, and deposits, underscoring how the currency’s appeal can broaden under sanctions and cross-border frictions.
Despite the growing footprint of the yuan, the currency’s share of global payments remains modest when measured against the U.S. dollar. The Swift payment system indicates that the yuan accounts for about 4.74% of global transactions, still trailing the dollar, euro, and pound sterling. Market participants view this as a stepping-stone in a longer transformation rather than an immediate replacement for established reserve currencies. The pace of adoption will likely depend on continued reforms, liquidity, and confidence in China’s financial markets.
Recent moves by the People’s Bank of China show a careful calibration of support for the yuan. There is a measuredSoftening trend in official guidance, aimed at avoiding excessive strength that could temper the country’s recovery and subsequently affect the attractiveness of Chinese assets. The currency’s trajectory remains a balancing act between stabilizing price and growth dynamics and signaling openness to international users and investors. In the near term, market expectations around the yuan will continue to reflect both domestic policy signals and external forces shaping global trade finance.
Observers previously offered speculative projections for next week’s exchange rates among the dollar, euro, and yuan. As with any currency outlook, uncertainty persists, and shifts in policy, trade momentum, and geopolitical tensions can quickly alter the path. The ongoing evolution of yuan usage in global settlements remains a key area for policymakers, financial institutions, and multinational corporations operating in Canada, the United States, and other major markets. (Financial Times, with data from SAFE)