The usage of the Chinese yuan in cross-border transactions is increasing rapidly through the de-dollarization initiatives. Developing countries are willing to accept the local currency for trade settlements, reducing dependency on the US dollar.
Emerging economies are teaming up to strengthen their native currencies in fear of potential US sanctions. US Treasury Secretary Janet Yellen confirmed that the White House sanctioning other countries has led to de-dollarization globally.
Also Read: BRICS Makes Major Announcement On New Payment System
The latest data from Bloomberg shows that the Chinese yuan recently outperformed the Euro and became the second-most used currency in the SWIFT payment system. The payment messaging system SWIFT highlights that the yuan currency approached nearly 6% of all global transactions in April 2024. Payments in the currency increased by 13.37% in June this year, retaining the second place only below the US dollar.
Also Read: De-Dollarization: How the US Is Helping Chinese Yuan To Succeed
Currency: Will The Chinese Yuan Go International Soon?
The internationalization of the Chinese yuan has already started but is at a slower pace. Its usage is rising, but it cannot cross 10% of all global transactions. Compared to this, around 78% of all trade is settled in the US dollar. That difference between heaven and earth poses no threat to the USD.
Also Read: US Dollar Weakening May Actually Be Good For US Stocks: Here’s How
However, developing countries are becoming more comfortable accepting the Chinese yuan than ever before. “It’s come to a certain stage that the use of Chinese yuan is no longer unfamiliar to foreign countries,” said Xia Le, Chief Economist for Asia at BBVA Research.
“Whether it’s an Indonesian airline buying a plane (in the Chinese yuan) or any other products, those countries that have close trade ties and international relations with China will use the yuan more,” said the analyst.
In conclusion, while the Chinese yuan is yet to become fully international, it is slowly yet steadily laying the groundwork. It could take a few more decades for the currency to be taken seriously in the global markets.