Yuan becomes second-most popular currency in trade finance

HONG KONG — The Chinese yuan has overtaken the euro to become the second-most used currency in global trade finance, according to global transaction-services body SWIFT.

The currency had an 8.66 per cent share of letters of credit and collections in October, compared with 6.64 per cent for the euro, said SWIFT in a statement yesterday.

China, Hong Kong, Singapore, Germany and Australia were the top five countries using the yuan for trade finance in October, it said.

In January last year, the yuan’s share of global trade finance was 1.89 per cent, compared with 7.87 per cent for the euro.

“It’s true that overseas exporters are using the yuan more as the contract currency to increase the attractiveness and competitiveness of goods or services sold to China,” said Ms Cynthia Wong, Head of emerging-market trading for Singapore and Hong Kong at Societe Generale.

The yuan now ranks behind the US dollar, which remains the leading currency with a share of 81.08 per cent.

The world’s No 2 economy is accelerating the pace of financial reform to promote its currency to international players beyond Hong Kong. China aims to lift the yuan’s global clout and reduce its reliance on the US dollar.

Yuan deposits in Hong Kong, the largest pool outside China, rose the most since April 2011 to a record 782 billion yuan (S$161 billion) in October. Agreements were announced this quarter to start direct currency trading between the yuan and both the British pound and Singapore dollar.

“The yuan is clearly a top currency for trade finance globally and even more so in Asia,” said SWIFT’s Asia-Pacific Head of Payments and Trade Markets, Franck de Praetere. Agencies