Yuan replaces U.S. dollar as most-used currency for cross border transactions in China

Yuan is in focus today after data from the State Administration of Foreign Exchange revealed that it was now the most-used currency for cross border payments in China.

Share of the U.S. dollar is sinking fast

The local currency represented a record 48% of the cross-border transactions in March – up sharply from nearly zero percent in 2010. According to Chris Leung of DBS Bank:

Yuan internationalisation is speeding up as other countries seek an alternative payment currency to diversify risks and as the credibility of the Federal Reserve is not as good as before.

Data from the administrative agency also confirmed today that share of the U.S. dollar in China’s cross-border payments and receipts tanked from 83% to 47% only between 2010 and March of 2023.

Yuan is still only a fraction of global payments

The forex market news arrives only weeks after data from the Moscow Exchange confirmed that the Yuan had replaced the U.S. dollar as the most widely-traded currency in Russia.

All in all, such developments suggest that China’s efforts into minimising reliance on the dollar are beginning to bear fruit at least at a local level. Globally, though, its currency still represented only 2.3% of the transactions in March. DBS economist Leung added:

We are still talking about a long way from dollar dominance, and the yuan’s share in global payment might be forever small.

Nonetheless, the State Council reiterated earlier this week that it’s committed to expanding share of its local currency in cross-border transactions.