Latest data and insights from SWIFT highlight five prominent factors that support a positive outlook for the internationalization of the renminbi (RMB), despite a decline in usage of the Chinese currency in international payments.
A special edition of the RMB Tracker was published ahead of SWIFT Business Forum China that took place on 28 July 2017. This report focuses on 2017 half year statistics and analysis from SWIFT, as well as expert industry insights about the internationalization of the RMB, with a particular focus on five key enablers driving global adoption of the currency:
- The Belt and Road initiative
- China’s Cross-border Interbank Payments System (CIPS)
- Hong Kong’s role as an essential RMB intermediator
- The relaxation of capital market controls, and
- FinTech’s contribution to the last mile of RMB connectivity
In June 2017, the SWIFT RMB Tracker ranked the RMB as #6 in world payment currencies. This indicates a slowdown in internationalization, with the proportion of international currency payments (customer initiated payments and institutional transfers) denominated in RMB falling from 2.09% in June 2015 to 1.98% in June 2017.
In spite of this trend, more than 1,900 financial institutions worldwide are using the RMB for payments as of June 2017. Out of the 1,900 cited, nearly 1,300 institutions are making RMB international payments with China or Hong Kong, representing a 16% increase from June 2015.
The report also notes that, despite efforts to internationalize the RMB, the US dollar remains the major currency for payments to China. For example, 98% of payments sent from the United States to China by volume are in US dollar, and the RMB’s share of payments remains low for all countries - between 1 and 2% - with the exception of Taiwan, where 15% of payments were made in RMB.
The report also notes promising RMB growth in South East Asian countries along the Maritime Silk Road. There is also a strong increase in RMB Credit Transfer Payments in value from China to Germany, Poland and Czechia (formerly Czech Republic). This is in contrast to substantial decreases from China to the Netherlands, France and Italy.
The report highlights Hong Kong’s continued role as an essential intermediator, increasing its RMB activity share to 76%. 49.4% of all RMB payments currently transit through Hong Kong.
Another finding of the report is that major Chinese banks are investing in cross-border payments innovation through the SWIFT gpi service. SWIFT gpi provides Chinese banks’ customers with a same-day payment experience around the world. Over 110 banks are part of the initiative, of which 16 in China.