The internationalisation of the Chinese renminbi (RMB) suffered a reverse in 2016 after years of steady growth, reports SWIFT.
The financial messaging services provider’s latest RMB Tracker shows that the payments value for the RMB decreased by as much as 29.5% in 2016. RMB’s share as an international payments currency dropped from 2.45% in January 2016 to 1.68% in December, ending 2016 as the sixth most active currency for international payments.
Overall, RMB payments value decreased by 15.08% between November and December, while in general all payments currencies increased slightly by 0.67%.
“The decrease in RMB usage for payments in December may be attributed to a convergence of several events – the slowdown of the Chinese economy, the volatility of the RMB exchange rate and regulatory measures on capital outflows,” commented Michael Moon, head of payments markets, Asia Pacific (APAC), SWIFT.
“Despite the slowdown, RMB internationalisation will continue to benefit from major financial infrastructure milestones, such as the Cross-border Interbank Payment System (CIPS) for cross-border clearing and a forthcoming RMB offshore centre in the United States.
“These efforts combined with a memorandum of understanding (MoU) CIPS signed with SWIFT in 2016 to grow payments traffic outside of China, will have a positive impact on the continued internationalisation of the currency.”
Vina Cheung, global head of RMB internationalisation for HSBC, suggested that the latest SWIFT was more likely to be a blip than a trend, commenting: “The maturing of RMB as a global currency is bound to involve some volatility, largely because of global macroeconomic factors.
“But we believe RMB internationalisation is a long term structural trend that is progressing to the next level, with better clearing infrastructure aligning to global currency settlement and global users now equipped with better knowledge of China’s regulatory framework. Payments and trade settlement were a key catalyst for early international use of RMB and will continue to be at the heart of its emergence as a global currency.”