RMB records rapid growth in cross-border settlement

Cross-border settlement of the Chinese currency renminbi, or the yuan, registered rapid growth during the first quarter of this year, continuing to expand its globalization process, CCTV reported.

In Northeast China's Heilongjiang province, Mudanjiang city saw cross-border RMB settlement increase 240 percent year-on-year in the first quarter; while in Central China's Hunan province, Zhuzhou city's cross-border RMB receipts and payments reached a nearly eight-year high.

In South China's Guangdong province, cross-border RMB settlement stood at 1.67 trillion yuan in the first three months, accounting for 51.6 percent of total local and foreign currency settlement. RMB settlement surpassed other currencies for the first time.

Besides cross-border settlement and payment, RMB also showcases its strength in cross-border investment and financing.

Low financing cost is the core strength for lending RMB directly from overseas. Over the past years, due to high inflation in some major economies, the dollar index has risen to a new high in 20 years, while the euro and pound recorded new lows.

Rate hikes from major economies brought high overseas financing cost, Luo Jun, general manager of the financial assets department under China General Nuclear Power Corp, told CCTV, adding that RMB financing cost is relatively lower, which can help enterprises reduce financing cost and going global.

Guan Tao, global chief economist of BOC International, said overseas demand for RMB, as a financing currency, is increasing. Based on statistics from the Society for Worldwide Interbank Financial Telecommunication, a global provider of financial messaging services, RMB's share in cross-border trade financing stood at 4.5 percent in February, compared with less than 2 percent in the same period of last year.

As a payment settlement currency, RMB experienced rapid growth in cross-border usage. Currently, RMB accounted for about 50 percent in total local and foreign currency cross-border receipts and payments. Data from the SWIFT showed RMB's global payment share reached 2.3 percent in 2022, retaining its position as the fifth most active currency for global payments.

As an investment and financing currency, RMB has expended its functions in recent years. As of the end of last year, the balance of renminbi assets held by foreign entities in China hit 9.6 trillion yuan ($1.4 trillion), a 1.2-fold increase since 2017.

As a trading currency, RMB's global position has improved significantly. Data from the Bank for International Settlements showed RMB's share in the global forex trading market rose to 7 percent in April 2022, becoming the fifth-largest trading currency.

As a forex reserve currency, at present, more than 80 overseas central banks or monetary authorities have included renminibi as forex reserve. RMB has become the fifth-largest reserve currency, and the weighting of the renminbi in the basket of currencies that make up the International Monetary Fund Special Drawing Rights－an international reserve asset also known as the SDRs ranked third, behind the dollar and the euro.

From settlement currency to reserve currency, RMB globalization is entering a new period and ushering in for more opportunities, expert said.

China's sound economic growth offered strong support for RMB globalization, attracting more foreign investors. Meanwhile, China's prudent monetary policy has maintained basic stability of economy, finance and RMB.

Overall, the market is confident about RMB, said Tu Yonghong, deputy director of the International Monetary Institute of the Renmin University of China. Over the past decade, the exchange fluctuations of RMB is the smallest among the seven major currencies, with the character of a safe haven currency, Thus, more investors, including companies and individuals, are willing to accept renminbi,Tu added.