China’s renminbi slipped a notch to become the sixth-most-used global currency over the course of last year, hit by depreciation and government capital controls, a report said on Thursday.
The renminbi’s share of international payments fell from 2.31 percent in December 2015 to 1.68 percent last month, global interbank network SWIFT said in a report titled RMB internationalisation stalls in 2016.
The report also said “the payments value for the RMB decreased by as much as 29.5 percent in 2016,” but it did not provide corresponding overall figures.
China has taken a number of steps over the years to increase the global use of the renminbi, also called the yuan, including currency-swap arrangements with other countries and increased linkages between its financial markets and payments systems with the outside world.
However, the renminbi was pummeled last year as the US dollar spiked. Investors moved huge sums of money offshore due to concern over China’s slowing economy and the currency’s future, which put further pressure on it. The authorities have in recent months announced a series of new measures to stem capital flight and slow the currency’s descent.
The yuan’s falling global usage “may be attributed to a convergence of several events: the slowdown of the Chinese economy, the volatility of the RMB exchange rate and regulatory measures on capital outflows,” SWIFT head of payments markets for the Asia-Pacific Michael Moon said in the report.
The report said improvements in the global payments system and other factors will have a long-term “positive impact on the continued internationalization of the currency.”
The renminbi’s share of global transactions looks unlikely to significantly rise as long as China limits capital flows and the yuan stays weak, both of which curb its attractiveness, said Julian Evans-Pritchard, China economist with Capital Economics in Singapore.
It could also face more pressure if new US President Donald Trump follows through on pledges to take protectionist moves or stimulate the US economy, which are likely to further lift the US dollar, he said.
The US dollar retained its position as the leading global currency last month, with 42.09 percent of global payments, according to SWIFT.
It was followed by the euro (31.30 percent), the British pound (7.20 percent), the yen (3.40 percent) and the Canadian dollar (1.93 percent), which leapfrogged the renminbi compared with December 2015. |
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