What’s new: The yuan is seeing increasing endorsement from overseas businesses as a financing currency, partly due to its lower costs, according to Becky Liu, head of China macro strategy at Standard Chartered Bank.
Speaking at the Caixin Summit on Friday, Liu predicted that the yuan will continue to be a low-interest currency until the end of next year. This is in stark contrast to the high interest rates in developed economies.
The comparison partly explains why the redback has outperformed the euro as a financing currency, she said.
The background: The yuan became the second-most used currency in the global trade finance market in September, surpassing the euro for the first time since the data started being available some six years ago, according to the Society for Worldwide Interbank Financial Telecommunication, also known as SWIFT.
In recent years, Beijing’s initiative to make the yuan more popular globally has benefited from multiple factors, Liu said. These include a dollar shortage, China’s currency swap agreements with other nations, and the Belt and Road Initiative that promotes trade and investment settlements in yuan.
Furthermore, the U.S.’ harsh sanctions on Russia for its war in Ukraine have prompted other countries to consider alternative plans in situations where the use of the greenback is banned, she said.
Related: Chinese Yuan Edges Out Euro as Second-Most Used Currency in Global Trade Finance
Contact reporter Qing Na (qingna@caixin.com) and editors Jonathan Breen (jonathanbreen@caixin.com) and Lin Jinbing (jinbinglin@caixin.com)
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