The global use of renminbi for payments fell in April, while the US dollar continues to dominate payments.
The Chinese currency fell to position six as global payments currency by value in April with a share of 1.82%, according to Swift’s renminbi tracker. The renminbi is now trailing the Canadian dollar with a share of 1.83%, showing a minor gap between the two currencies. Overall, renminbi payments value decreased by 7.73% compared to March 2016, whilst in general all payments currencies decreased by 4.60%.
But the use of renminbi is gaining traction in certain markets. In India, the use of renminbi for payments in value with mainland China and Hong Kong is on the rise. The country, however, still shows one of the lowest renminbi adoption rates among Asian countries/regions, ranked 38thworldwide.
In April 2016, 3.8% of all payments made between India and mainland China/Hong Kong were exchanged in renminbi while this was only 0.2% back in April 2014.
"The renminbi is a fast-growing global currency and some traction is clearly being seen in India’s trade, especially in business done with companies in China and Hong Kong,” says Sandeep Uppal, head commercial banking, HSBC. “Recent SWIFT data suggests that growing trade between India and China will likely lift India's renminbi adoption rate," he adds.
Since 2014, the Chinese currency moved from position number six to position four for payments by value overtaking the Hong Kong dollar and the British pound. The US dollar, however, continues to lead the corridor with a share of almost 80%, followed by the Indian rupee (7.2%) and the euro (6.3%).
"China has emerged over the last decade to become India's largest trading partner," says Michael Moon, head of payments, Asia-Pacific at Swift. "As a result, renminbi adoption is slowly gaining traction for payments between India and China. Over time, and in line with the growing importance of this emerging trade corridor, we expect to see greater use of the renminbi between these two countries. It is an exciting time for the Indian banking community. Not only are they helping to further internationalize the renminbi, but are embracing new tools to support trade growth and financial sector globalisation."
Earlier this year, Swift and nine Indian banks launched Swift India, a joint venture that provides domestic financial messaging service for Indian banks, global banks, securities houses and corporates. Swift India will support growth in automation, financial message standardisation, systems and processes for all financial market participants in India. These capabilities encompass all important infrastructure enablers that can support further development of cross-border payments for India.