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China's International Use of Renminbi Soars to Record Highs Amid Growing Ties with Russia
As closer ties with Russia bolster Beijing's efforts to internationalize its currency, China has witnessed a significant surge in the use of renminbi for cross-border transactions. In July 2024, approximately 53 of China's inbound and outbound transactions were conducted using the Chinese currency, marking an increase from around 40 in the same month the previous year.
The State Administration of Foreign Exchange data reflects cross-border transfers through banks on behalf of non-banking clients, primarily indicating trade settlements. The information also encompasses investment flows and debt payments.
China's growing role as a trading partner to Russia has provided a boost for its currency usage following the sanctions imposed by the United States in response to Russia's invasion of Ukrne. In February 2024, Russia's Central Bank Governor Elvira Nabiullina noted an increase in China-Russia trade settlements, financial transactions, and deposits settled using renminbi.
Sanctions-induced circumstances have significantly fueled China’s efforts to develop its financial system and connect with Russia, sd Alexandra Prokopenko, a research fellow at the Carnegie Institute in Berlin.
Growth of trade conducted in renminbi has also been facilitated by currency swap lines established or renewed by Beijing throughout 2023 with countries like Saudi Arabia, Argentina, and Mongoliacommodity producers whose goods China highly desires. Additionally, new clearing banks for renminbi have been launched in Laos, Kazakhstan, Pakistan, Brazil, and Serbia.
These developments reflect China's growing autonomy from the U.S. dollar by facilitating trade transactions without relying solely on it. By promoting renminbi use in global commerce, Beijing is ming to reduce its dependence on a potentially unstable international monetary system.
China's primary motives here are about achieving independence and strengthening resilience, sd Daniel McDowell, a professor at Syracuse University and senior fellow at the Atlantic Council. They're not seeking to topple the dollar's global dominance; that comes with significant responsibilities and vulnerabilities.
Long-standing obstacles such as China's capital controls and the strong network effects supporting the U.S. dollar's use pose limitations on renminbi's widespread adoption beyond trade settlements.
Nevertheless, most foreign exchange traders prefer transactions through the dollar for its stability and established networks. However, activity in renminbi payments has been growing among China's client base, indicating a slow grind toward becoming a critical currency alternative.
As global economic dynamics continue to evolve, China remns focused on enhancing renminbi's role in international trade while navigating the complex landscape of global financial systems.
The Financial Times and its journalism are subject to self-regulation through the FT Editorial Code of Practice.
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Chinas International Renminbi Usage Soars Close Russia China Ties Boost Renminbi Increased Cross Border Transactions in RMB Renminbi Gains Amid US Sanctions on Russia Renminbis Role in Global Trade Expansion Currency Swap Lines Strengthen International Appeal