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| Back out of the global top 5: the not-so-mighty RMB. |
At any rate, RMB is falling down the currency league tables. It goes unmentioned here though that the Swiss franc (CHF) became stronger and presumably more attractive as a vehicle currency in the wake of it losing its euro peg in January:
China's yuan has dropped to seventh place among the world's payments currencies, global transactions organisation SWIFT said Monday, even as Beijing tries to push greater international use of the unit. The yuan -- also known as the renminbi -- held a 1.81 percent share in world payments based on value in February, SWIFT said in a statement on Monday, down from 2.06 percent in January, when it stood in fifth place. The Swiss franc and the Canadian dollar overtook the Chinese currency last month, SWIFT data showed.
The official excuse for now is that the Chinese New Year (lunar) holidays caused business activity to slow during the month, hence the drop. They had to come up with an excuse since this result does not square nicely with China promoting the "bandwagon effect" that more and more are using RMB:
It attributed the weaker showing to the "seasonal effect" of the Chinese New Year, when business slows because of a week-long holiday. But the demotion also comes amid mounting worries over China's slowing economy, though officials have denied strong capital outflows. China keeps a tight grip on the value of the yuan out of concerns that unpredictable currency inflows and outflows could harm the economy and weaken its financial control.
That said, much hinges on China approving of more offshore destinations where trading yuan is acceptable. For now, Hong Kong dominates:
Hong Kong, a special administrative region of China which is considered the business gateway to the mainland, handles more than 70 percent of global payments in yuan, SWIFT said, but the share of other countries is growing. "Broader support by more countries beyond Hong Kong, underlining its international use, suggests the potential for future clearing centres and further development of the currency," Michael Moon, head of payments for Asia-Pacific at SWIFT, said in the statement.
As if all the above weren't enough, also consider that dim sum bond issuance--offshore bonds denominated in RMB--is likely to fall this year, too:
Issuance of offshore renminbi bonds — known as “dim sum” bonds — has fallen sharply this year, and is expected by some analysts to record the first annual contraction since the market opened in 2007. So far this year, $5bn has been raised in the dim sum bond market, according to Dealogic, down from $8.6bn over the same period in 2014.So it's still all to play for, but China has to redouble its efforts in the face of a slowing domestic economy. One of the things to watch for is how much the RMB depreciates since engaging in the same competitive devaluation everyone else is doing may be good for Chinese exports in the short term but do nothing to encourage use of the yuan as a dollar alternative in the medium term.
A recent survey by HSBC found that fewer global companies were expecting to increase their use of renminbi in cross-border business this year than did in a similar survey a year earlier. HSBC also found that only 27 per cent of those not currently using the renminbi are planning to start using it, down from 32 per cent in 2014.