The Chinese yuan’s share of world trade financing jumped from 3.91 percent at the start of the year to 5.8 percent in September, according to the the Society for Worldwide Interbank Financial Telecommunications (SWIFT).
Global companies are issuing record amounts of bonds denominated in yuan and borrowing heavily from Chinese banks due to low interest rates, and the Chinese yuan has overtaken the euro in financing world trade, reports Securities Transfer Association (STA).
Foreign companies and banks are raising record amounts of money in mainland China and Hong Kong through the issuance of ”panda” and ”dim sum” yuan bonds, Reuters notes.
Panda bonds continuously promote the use of the renminbi (yuan) as a currency for financial transactions, China’s central bank announced in October. This motivated banks to lend to foreign companies and enabled wider use of the yuan outside of China.
In the first 10 months of this year, companies such as German carmaker BMW and French bank Crédit Agricole, as well as overseas branches of Chinese companies, raised a record 125.5 billion yuan ($17.33 billion) through the issuance of ‘panda’ bonds, 61 percent more than last year.
In financing trade and payments, the use of the yuan is largely limited to developing countries with friendly relations with China, such as those involved in its Belt and Road Initiative.
There has been an increase in the use of the yuan in trade transactions, but only within certain bilateral channels, with countries such as Russia, Argentina, Pakistan and Nigeria, said Mark Williams, chief Asia economist at Capital Economics.
Countries geopolitically linked to the United States (U.S.) show no interest in switching to the yuan, implying that the global use of the yuan in trade will be limited, Williams estimates, Biznis Info reports.
E.Dz.
