The Chinese yuan has surpassed the euro to become the world’s second-most used currency in SWIFT trade settlements, according to data from the international SWIFT system. This marks a significant milestone in China’s efforts to internationalise its currency.
As of September 2023, the yuan accounted for 5.8% of international payments, up from 4.82% in August. This is the highest share the yuan has held in the last five years. Despite this increase, the US dollar remains the dominant currency in global trade, with an 84.15% share in September, a slight increase from 83.95% in August.
The euro now ranks third in international payments, with its share decreasing to 5.43% in September from 6.43% in August. The Japanese yen and the Saudi rial follow, ranking fourth and fifth, respectively.
This development comes as China continues to expand its economic influence globally. Despite the yuan’s share of global payments remaining small compared to the size of China’s economy, it has seen a steady increase from 1.81% about five years ago.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a Belgian cooperative society that provides services related to the execution of financial transactions and payments between banks worldwide. The US dollar and the euro have traditionally dominated SWIFT payments, making up more than seven out of 10 payments in 2023.
The rise of the yuan in international trade settlements is seen as a reflection of China’s growing economic power and its efforts to make the yuan a global reserve currency. However, the yuan’s share is still negligible compared to the dollar’s 46.6%.
China introduced the yuan as its currency system in the late 1800s, and it has had a currency peg since 1994. This peg, along with China’s robust export economy, has helped the yuan gain traction in global trade. The recent data from SWIFT indicates a shift in the global financial landscape, with the yuan’s growing prominence signalling China’s increasing role in international trade and finance.