In a significant milestone, the Chinese yuan has eclipsed the euro, claiming the position of the world’s second-most used currency in SWIFT trade settlements, as per data sourced from the international SWIFT system. This achievement underscores China’s ongoing efforts to internationalize its currency.
As of September 2023, the yuan’s share in international payments surged to 5.8%, marking a notable increase from 4.82% in August. This is the highest market share the Chinese currency has attained in the past five years. It’s worth noting that, despite this surge, the US dollar maintains its dominance in the realm of global trade, commanding a substantial 84.15% share in September, slightly up from 83.95% in August.
This development has propelled the euro into the third position among international payments, with its market share dwindling to 5.43% in September, down from 6.43% in August. The Japanese yen and the Saudi rial occupy the fourth and fifth spots, respectively.
China’s ascendancy in this regard coincides with its consistent efforts to extend its economic influence worldwide. While the yuan’s share in global payments remains relatively modest in comparison to the size of China’s economy, it has exhibited a steady growth trajectory since hovering around 1.81% approximately five years ago.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a Belgian cooperative society facilitating financial transactions and payments between banks on a global scale. Traditionally, SWIFT payments have been dominated by the US dollar and the euro, collectively accounting for more than 70% of all transactions in 2023.
The yuan’s burgeoning role in international trade settlements signifies China’s rising economic prowess and its aspirations to establish the yuan as a global reserve currency. However, it’s essential to acknowledge that the yuan’s share still remains relatively diminutive in comparison to the dollar’s commanding 46.6% market presence.
China introduced the yuan as its currency system in the late 1800s and maintained a currency peg since 1994. This peg, along with China’s robust export-oriented economy, has played a pivotal role in enabling the yuan’s increasing utilization in global trade.
The latest data from SWIFT exemplifies a notable shift in the global financial landscape, underlining the yuan’s growing significance as a testament to China’s escalating role in the realm of international trade and finance.