London now leads the foreign exchange (FX) business for the renminbi (RMB), handling 33.79% of the world’s RMB offshore FX transactions. Backed by its status as a major foreign exchange centre, diverse investor profile and wide liquidity range, London has paved the way for the local clearing of the RMB currency with the support of RMB-clearing banks appointed by the People’s Bank of China (PBOC).
The 2019 Sibos-edition RMB Tracker by SWIFT found that there has been an increase in the number of financial institutions using the RMB for payments globally. It was up 11.31% in July 2019 compared with July 2017, taking the total from 1,989 to 2,214. The biggest increase - 20.98% - can be seen in Africa and the Middle East, in which the number rose from just 143 financial institutions in July 2017 to 173 in July this year.
The increase in the number of financial institutions using the RMB for payments is largely driven by China’s efforts in Africa, the Middle East, and Asia. At the same time, China is supporting countries in ASEAN by positioning the Guangxi province as the region’s financial gateway to China.
From an FX perspective, the RMB’s usage in the FX Market is still low. SWIFT data shows that while the RMB appears within the top 10 currencies across various FX instruments, in terms of weight, the RMB represents less than 3.00% of activity share for these instruments combined.
As of August 2019, the RMB’s share as a global payments currency is 2.22%. When excluding intra-eurozone payments, the activity share is lower at 1.42%. The US dollar is a key currency used for cross-border payments done by the UK, with 38.99% of activity share year-to-date. However, the use of euros fell to 26.18% in the same period.
Hong Kong remains the largest RMB-clearing centre globally, with a 76.36% share of RMB activity outside Mainland China, followed by the UK at 6.18% of activity share.
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