On October 27, the Industrial and Commercial Bank of China (ICBC) took a significant step in the global expansion of the renminbi (RMB) by launching an RMB clearing bank in Pakistan. This move facilitates the clearance and settlement of cross-border transactions and supports Chinese yuan-related activities such as buying, selling, borrowing, and lending for participating banks in Pakistan.
On the same day, the People’s Bank of China (PBOC) released its 2023 Yuan Internationalization Report, highlighting the impressive trajectory of the yuan towards international recognition and acceptance. Since 2022, China has strategically expanded its network of yuan clearing banks in various global locations, including Laos, Kazakhstan, Pakistan, and Brazil, enhancing the yuan’s overseas clearing network to align with the evolving dynamics of international finance.
The yuan’s cross-border business capabilities have shown remarkable momentum. In the first nine months of 2023, the total value of yuan cross-border payments surged to an impressive 38.9 trillion yuan (approximately $5.32 trillion), marking a 24 percent increase compared to the previous year. Yuan-based cross-border transactions now constitute 24.4 percent of total cross-border payments in goods trade, a substantial 7 percent rise over the previous year.
This development underscores the rising prominence of the Chinese currency on the global stage, coinciding with a worldwide movement to reduce reliance on the U.S. dollar in international trade. While the ascent of the yuan is still in its early stages, the potential for its extensive utilization in offshore markets is vast. This potential is grounded in China’s robust economic strength and its extensive network of trade and business partnerships across the globe, significantly bolstered by initiatives like the Belt and Road Initiative.
The Chinese central bank has authorized 31 yuan-clearing banks in 29 countries and regions, achieving multi-faceted coverage across all continents. In September, the yuan reached a significant milestone by representing 3.71 percent of global payments by value, according to SWIFT data, marking a notable increase from 1.91 percent in January.
An increasing number of countries are opting to engage in trade using currencies other than the U.S. dollar, alongside a deliberate diversification of their foreign exchange reserves. For instance, Argentina has adopted the yuan to service its foreign debt obligations, and Pakistan is using the yuan to settle its expenses related to Russian crude oil. These steps by developing countries indicate a potential acceleration of de-dollarization, driven by concerns surrounding fiscal and monetary policies in the United States.
Reference(s):
Rise in RMB's global acceptance: China's financial transformation
cgtn.com
