Yuan marches forward in global settlements

East China's industrial hub leads way in cross-border biz transactions

Back on Dec 6, E-ter Network based in Yiwu, Zhejiang province, received a payment from a Saudi Arabian client for daily necessities such as storage boxes, water bottles and handbags.

It took less than six hours for the money to reach the company's bank account, said Wu Jiajia, a member of the company's top management, much faster than he originally expected.

"The transaction was initiated at about 5 pm Beijing time, and sometimes after 10 pm, we got a phone message notifying us of the arrival of the payment," Wu said.

"Over 1.6 million yuan ($218,722)," he added.

The amount may seem small. During the year 2022, E-ter Network handled exports of goods worth more than 150 million yuan to Saudi Arabia.

But it was the first cross-border business transaction between Yiwu and the Middle East nation — and indeed between China and the Arab world — settled in renminbi, the Chinese currency.

"It means we can conduct more business with our clients in Saudi Arabia directly in yuan," Wu said.

A county-level city with a permanent population of a little more than 1.86 million, Yiwu, located some 140 kilometers from the provincial capital of Hangzhou, is better known as the world's capital for small commodities, selling a wide range of consumer goods, ranging from daily use items to sports-related products.

Statistics from Yiwu's commerce bureau indicate that the city now sells more than 2.1 million types of products to over 230 countries and regions, and some 65 percent of Yiwu's trade in goods is for export.

The highly export-oriented business nature and the city's close trade connections with emerging economies like the Arab world, Africa, Southeast Asia and South America, have made Yiwu a key testing ground in China's efforts to internationalize its currency.

In December 2012, Yiwu became the first Chinese city to launch a pilot reform program of cross-border renminbi settlement for individual traders and small businesses, effectively lifting restrictions on the amount of yuan settlements they were previously subject to.

Chinese businesspersons in such cities were — and are — permitted to exchange the equivalent of no more than $50,000 in foreign currency every year, as per relevant regulations.

By the end of December 2013, a year after the pilot scheme was put in place, figures from the local branch of the People's Bank of China — the country's central bank — show that 16 banks in Yiwu had opened individual cross-border trade renminbi settlement business services. They handled 12,000 transactions for 1,693 market entities, with the total amount reaching 8.6 billion yuan and covering 76 countries and regions.

Roughly a decade later, in the year 2022 alone, some 176 countries and regions conducted cross-border renminbi settlements worth 56.54 billion yuan with Yiwu traders, a year-on-year increase of 56.23 percent, and close to 61 percent of the settlements, or 34.42 billion, were for individuals, a year-on-year increase of 45.09 percent.

With its exports standing at over 430 billion yuan last year, this means that over 13 percent of the deals in Yiwu were done in renminbi, with more expected going forward.

Cross-border yuan settlements have been on the rise, particularly over the past few years, said Zhang Wenjing, deputy general manager of Yiwu Pay, a third-party platform that helps facilitate cross-border payments for the city's merchants.

"Since the official launch of Yiwu Pay this February, more than 16,000 merchants in the Yiwu International Trade Market have opened accounts at Yiwu Pay," Zhang said.

In other words, about 30 percent of the merchants who operate 75,000 stores using the market have signed up for the service.

"Cross-border RMB settlements valued at over a billion yuan have gone through our platform, with the volume expected to surge to more than 7 billion yuan at the end of the year," she added.

Indeed, the first cross-border renminbi payment from Saudi Arabia to China was sent through Yiwu Pay.

Innovations like Yiwu Pay, which has partnered with over 400 banks and financial institutions in more than 120 countries and regions, and supports 20 major currencies for international settlement, have made cross-border renminbi settlement a more attractive and viable option.