Yuan Beats US Dollar to Become Most Used Currency in Cross-Border Transactions in China

The Chinese yuan has become the most commonly used currency for cross-border transactions in China. In March, the yuan overtook the US dollar for the first time in cross-border transactions in the country. In particular, the Chinese government continues to push for the use of its currency in settling cross-border trades. The country’s authorities are trying to internationalize its use.

According to Reuters count Yuan use in cross-border payments and receipts rose to a record $549.9 billion last month, based on data from the State Administration of Foreign Exchange. This is higher than the $434.5 billion recorded in the previous month. The report shows that 48.4% of all cross-border transactions were attributed to the yuan, while the dollar’s share fell to 46.7% from 48.6% in the previous month.

The Chinese government has come a long way in promoting the use of the yuan in cross-border transactions. In 2019, the currency was approximately 0% share in cross-border payments and receipts, Now, the most populous country has reached an important milestone in its bid to reduce its dependence on the US.

Chinese and global use of the yuan in cross-border transactions

Despite surpassing the US dollar in cross-border payments in China, the use of the yuan in global trade finance remains low. Its share in global transactions in March was about 4.5%, while the dollar’s share was 83.7%. In particular, the use of the yuan in global trade finance has grown steadily, with China entering into non-dollar trade agreements with countries such as Brazil. In addition, the Chinese official currency has overtaken the USD to become the most traded currency in Russia. That’s because Moscow has been cut off from global finance since last year’s invasion of Ukraine. According to bloomberg dataThe Chinese yuan topped the US dollar as the most traded cryptocurrency in February and March 2023. After the currency’s change in February, the trend became more pronounced the following month. Moscow and Beijing kept up the winning momentum while deepening political and economic ties.

before the implementation of Western sanctions due to Russian invasion of UkraineTrading of the yuan in Russian markets was minimal. However, since March 2022 the volumes have been steadily increasing.

Even though the Chinese Yuan is making unprecedented waves, analysts believe that the USD has a solid position globally. He said that the US dollar is unlikely to lose its dominance in the global markets in the near future. The US currency has dominated global trade and has been the major reserve currency since World War II.

As the dollar falls behind the Chinese yuan for the first time in cross-border transactions, fingers are crossed on how long the yuan will hold its new position.

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Ibukun is a crypto/finance writer interested in delivering relevant information using non-complicated words to reach all types of audiences. Apart from writing, she enjoys watching movies, cooking and exploring restaurants in the city of Lagos where she lives.