Renminbi Adopted for More Documentary Credit Transactions
Following the renminbi’s (RMB) recent breakthrough into the top five world currencies used in global payments, the Chinese currency is also being more widely adopted as the currency for documentary credit transactions.
Financial messaging services provider SWIFT reports that its most recent data shows the RMB’s activity share for documentary credits increased in value from 7.32% in January 2013 to 9.43% in January 2015.
This strengthens the RMB’s position as the second most-used currency for this purpose, ranking behind the US dollar (USD) which remains the leading currency for documentary credits with a share of nearly 80%.
Last month, China, Singapore and Hong Kong remain the top three countries using RMB as currency for documentary credits, exchanging nearly 95% of all RMB documentary credit transactions worldwide in value. They were followed by Macau and Taiwan with 0.88% and 0.86 %, respectively.
“Letters of credit [LCs] and documentary collections are widely used instruments to finance trade flows across Asia,” said André Casterman, global head, corporate and supply chain markets at SWIFT.
“China’s position as one of the main exporting and importing countries in the world is supporting the increasing use of the Chinese currency. However, many of these RMB transactions are still mostly driven by China and Hong Kong, even though the RMB is nearly 10% of traditional trade finance flows globally in terms of value.”
In January 2015, the RMB held its position as the fifth most used payments currency in the world with an activity share of 2.06%. Overall, RMB payments decreased in value by 10.22% in January 2015, whilst the decrease for all payments currencies was at 5.7%.