A vessel carrying 65,000 tons of liquefied natural gas (LNG) is unloaded at an LNG reception station of China National Offshore Oil Corporation in south China's Guangdong province, May 16. It is China's first yuan-settled LNG trade. (Photo by Li Jianqiang/People's Daily Online)
China's Renminbi (RMB) has continually expanded its global presence in tandem with China's accelerating economic development and greater degree of openness. The RMB now plays a more significant role in cross-border payments, investments, financing, exchange reserves, and invoicing.
A Chinese official says the country will continue to refine the foundational systems for RMB settlements in cross-border investment and financing transactions. Furthermore, China plans to enhance its foreign exchange and financial market's openness and ensure improved accessibility. Lastly, the country remains committed to fostering the internationalization of the RMB in a structured and systematic manner.
On April 26, the Argentine government declared that it would pay for imports from China using the RMB. Argentine Economics Minister Sergio Massa said that this action signifies an additional activation of the currency swap agreement between China and Argentina. This decision helps Argentina bolster its foreign exchange reserves and is crucial for improving the nation's economic situation.
Earlier, on February 7, China's central bank, the People's Bank of China (PBOC), announced that it had entered into a memorandum of cooperation with its Brazilian counterpart to set up RMB clearing arrangements in Brazil.
Two months following this, the Industrial and Commercial Bank of China (ICBC), having been authorized by the PBOC as an RMB clearing bank in Brazil, executed the first cross-border RMB settlement transaction in the South American country at its local branch. This milestone represents significant advancement in the ICBC's cross-border RMB operations in Brazil.
At the end of March this year, the first yuan-settled liquefied natural gas (LNG) trade was completed, marking a major step in China's exploration of cross-border yuan payments in the petroleum and gas trade.
According to statistics, China's cross-border receipts and payments settled in RMB amounted to 42 trillion yuan ($5.91 trillion) in 2022. This represented a 3.4-fold increase compared to 2017 and accounted for almost half of the country's total cross-border receipts and payments. A noticeable surge in cross-border RMB settlements was observed in the first quarter of this year as well.
Additionally, the PBOC has authorized 31 RMB clearing banks across 29 countries and regions. It has also signed bilateral currency swap agreements with central banks or monetary authorities in 40 countries and regions, with a combined value exceeding 4 trillion yuan.
"Cross-border settlement is a crucial indicator of the RMB's internationalization. The Chinese currency is increasingly being used in numerous countries and regions for settlement and payment, reflecting its further internationalization," said Wang Jiaqiang, a senior researcher with the Bank of China Research Institute.
The RMB is also gaining increased global acceptance as a reserve currency.
According to a recent report issued by Brazil's central bank, the RMB became an official reserve currency for Brazil in 2019. As of the end of 2022, the RMB's share of Brazil's international exchange reserves reached 5.37 percent, exceeding the proportion held by the euro of 4.74 percent. This milestone signified that the RMB had become Brazil's second-largest international reserve currency.
More than 80 central banks or monetary authorities, including Brazil's central bank, have recognized the RMB as an international reserve currency. The RMB has maintained its status as the fifth-largest reserve currency, and its weighting in the basket of currencies that form the International Monetary Fund Special Drawing Rights - an international reserve asset also referred to as the SDRs - is now third.
Industry insiders believe that the RMB has made significant breakthroughs and advancements in its internationalization this year.
With the establishment of RMB clearing banks and local currency swap networks, the development of the offshore RMB market, the opening of the domestic financial market, and the enhancement of the overseas structure of Chinese financial institutions, the RMB has preliminarily demonstrated the network effect, or cumulative growth advantage, of its international usage.
Additionally, the investment and risk-hedging properties of RMB assets have been progressively enhanced. Enterprises are showing an increased preference for using RMB in cross-border trade, investment, and financing to circumvent currency mismatch risks. Consequently, the international monetary system is becoming more diversified.