Additionally, a report from Standard Chartered highlighted that the Standard Chartered Renminbi Global Index had been on a consistent upward trajectory for the fifth consecutive month in July, marking a 17 percent increase since the beginning of the year.
Cross-border Renminbi Settlement Continues to Increase
With more and more enterprises using RMB in cross-border trade settlements, the role of cross-border RMB business in serving the real economy continues to grow.
In March this year, Yiwu Gemei Household Electrical Appliances Co., Ltd. completed its first foreign trade order of direct currency settlement with the Dubai market. Overseas buyers do not need to convert their payments into US dollars through overseas banks, nor do they need to settle their payments in Hong Kong in RMB and then remit them to domestic bank cards. Rather, they can directly achieve cross-border RMB settlement through the co-operation of third-party payment institutions and overseas branches of Chinese banks. Cai Zhenghao, the person in charge of the company, stated that this not only enhances the payment efficiency, but also avoids the exchange risk and reduces the cost of handling fee.
Mo Ji, chief China economist at DBS Bank, revealed that in recent years, the fluctuation of RMB has been smaller than that of the world’s major currencies, and the proportion of RMB being used in trade settlement has been increasing year by year, and the use of scenarios has been gradually expanding.
Introducing foreign trade policies as support
In addition, the People’s Bank of China (PBOC) has introduced cross-border RMB support policies which aim to stabilise foreign investment and foreign trade, to facilitate new types of offshore trade, and new forms of business in foreign trade. All these have contributed to the continuous increase in the proportion of RMB settlements in trade receipts and payments of goods.
Statistics from the People’s Bank of China, the country’s central bank, indicate a notable rise in the proportion of cross-border settlements for goods trade conducted in renminbi from January to July of the current year, reaching 27 percent. This figure represents a 2-percentage-point increase compared to the entire year of 2023.
“In the first half of this year, HSBC China’s cross-border RMB settlement business grew significantly year-on-year, and among the enterprises that started cross-border RMB settlement, there were many well-known Chinese passenger car and construction vehicle enterprises,’ said Zeng Su, managing director of HSBC China’s Global Payment Solutions Department, adding that cross-border e-commerce companies preferred to use RMB in cross-border settlements due to exchange risk considerations.
Currency Swap to Promote Investment
The PBOC has inked bilateral currency swap agreements with central banks and monetary authorities from approximately 30 countries and regions worldwide, spanning the Middle East, South America, Asia and Africa.
The report on China’s monetary policy implementation in the second quarter of 2024 released by the PBOC showed that as at the end of June, under the bilateral local currency swap agreements signed between the PBOC and foreign monetary authorities, the foreign monetary authorities utilised RMB 104.5 billion yuan of the balance, while the PBOC utilised the balance of the foreign currencies equivalent to US$481 million, which has played a positive role in promoting bilateral trade and investment.
