Market news

17 August 2021

Yuan’s global use faces test as Xi’s reforms rattle markets

Bloomberg reports that the Chinese yuan has been making inroads in the world of cross-border payments in recent years, but a pair of data points due this week will reveal whether the country’s sudden industry crackdowns have dented international trust in the currency.

The Swift and China’s foreign-exchange regulator will both announce figures this week that together paint a picture of the yuan’s role in international trade and investment. Previous data through June showed a steady increase in its use but that was before a regulatory crackdown escalated in July.

The authorities scaled up their anti-monopoly attacks against the nation’s largest technology companies, banned profits in the after-school tutoring industry, and launched a critique of online gaming. 

The share of yuan payments via Swift increased to 2.46% in June, just under the peak reached in March that was the highest level since a shock devaluation in August 2015. The percentage of cross-border transactions that were conducted in the currency increased to 42.3% in the same month, close to January’s record high of 43.8%.

Since the devaluation, China has since worked to revive the yuan’s popularity, urging greater use of the currency in trade and easing exchange-rate controls and intervention.

Global funds boosted holdings of Chinese government bonds to a record in July despite that month’s market turmoil, and inflows are expected to continue as some of the securities will be included in FTSE Russell’s flagship global index this October.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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