In January, RMB payments declined 14.7% versus December 2011, compared with an average 1.9% for all currencies, causing RMB to fall back to the 20th most-used payment currency, having reached number 17 for the last three months in 2011. Swift cite reduced business activity over the Chinese New Year holiday period as a likely explanation for the pull back in RMB payments.
However, Swift’s figures show that, over the past year as a whole, growth of RMB payments has well exceeded that of other currencies, growing at a compound monthly rate of 14.8% versus an average of 0.7% for other currencies.
Can the renminbi follow the yen’s internationalization?
| JPY is used far more extensively than RMB |
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The RMB still has a long way to go, compared with the pervasive use of JPY internationally. But as the Chinese currency becomes liberalized and trade links continue to develop, the use of the RMB for cross-border payments could become an established practice, as it has for the Japanese yen during the past two decades. “Looking at the Japanese case shows there is tremendous scope for payments to switch from being predominantly in USD to RMB,” says Swift in its monthly analysis report of global payments.
Swift’s data shows that only a fifth of banks that sent payments to China and Hong Kong also used RMB, whereas virtually every bank that sent payments to Japan used JPY in December.
Looking at data on payments going into China and Hong Kong, seen as a proxy for exports, they show just 2.5% were in RMB compared with Japan, where 59% of all incoming payments were denominated in JPY.
Data on payments sent from China and Hong Kong – a proxy for imports – show that just 1.7% of those were in RMB, whereas 40% of outgoing Japanese payments were in JPY.
Overall, 65% of all payments by China and Hong Kong were in USD and just 2.5% in RMB. This compares with Japan where 21% of payments were in USD and more than 70% were in JPY.
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