Historic Shift: Chinese Yuan Surpasses US Dollar in Cross-Border Trade, Reports Goldman Sachs
According to banking giant Goldman Sachs, a significant milestone has been reached as the Chinese yuan surpasses the US dollar in China’s cross-border payments for the first time in history.
The yuan’s share of cross-border settlements hit a record high in March. Primarily driven by foreign traders investing in renminbi assets. Goldman Sachs highlights China’s remarkable progress in becoming a medium of exchange in global markets. But it acknowledges that the yuan still faces challenges in fully competing with the dollar. Capital controls and limited tradability of the renminbi may hinder its advancement as a ‘store of value’ and ‘unit of account.’ Despite this achievement, the US dollar remains dominant in international payments, accounting for 43% in May. As per SWIFT data. However, the research shows that yuan-based trading. Particularly linked to portfolio investments like China’s domestic stock and bond market, has played a crucial role in boosting the yuan’s usage.
The offshore center for renminbi, Hong Kong, has seen an uptick in yuan-based trading. While China’s currency gains ground in various markets. It is still relatively underutilized as a store of value and accounts for a small portion of international bond markets and global reserves. Nevertheless, Hong Kong offers a wide array of renminbi-denominated assets for global investors. Including bonds, investment funds, commodities, ETFs, real estate investment trusts, equities, and insurance products.
Clever Robot News Desk 4th August 2023
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