Last month, China and Japan announced plans to start trading the renminbi against the yen directly, as Beijing continued its push to internationalize its currency. From June 1, the two currencies started trading via brokers in Tokyo and through an expanded panel of market makers in the onshore China Foreign Exchange Trade System in Shanghai.
The push for an initiative from China and Japan to boost the use of their currencies for trade, which analysts estimate to be worth just under $350 billion annually, is apparent since the majority of the payments between the two countries are conducted in dollars.
Indeed, the latest figures from Swift show the dollar accounted for 52.4% of customer-initiated payments between Hong Kong and mainland China in May. The second most-used currency was the yen at 43.9%.
The Hong Kong dollar came in third with 1.6%, while the renminbi was only used in 1.3% of customer-initiated payments.
“There is plenty of opportunity for the world’s second and third largest economies to promote their respective currencies, since the majority of payments between them is done in a third currency, namely the US dollar,” says Wim Raymaekers, head of banking markets at Swift.
| USD most used currency between China/Hong Kong and Japan |
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| Source: Swift |
Overall, Swift reports it was a good month for renminbi payments, which grew by 32.3% from April to May, outpacing the 12.9% in growth across all currencies. That meant the renminbi share of global payments rose from 0.34% to 0.4%, keeping it as the world’s 16th most popular payment currency.
Raymaekers says, while developing renminbi payments with Japan has plenty of scope, payment flows with the country represent just about 5% across all currencies of Hong Kong and mainland China’s customer-initiated payments.
He says to further grow the internationalization of the renminbi, China should look beyond Japan.
“Europe, the rest of Asia and also North America – which represents nearly 60% of all China/Hong Kong’s customer-initiated payments and where renminbi adoption is below 1% – offer great opportunities,” says Raymaekers.
| China should look beyond Japan to grow renminbi internationalization |
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| Source: Swift |