For many years now, Beijing has been putting in effort to boost the overseas use of its currency, the yuan. This has been a priority, especially in the face of US Dollar dominance. The push has involved attempts to boost the yuan’s appeal as an alternative in international trade and as a reserve currency.
Their efforts have bore some fruit as there is a noticeable increase in its currency’s use in trade finance, international payments, foreign exchange transactions and central bank reserve assets.
Despite this progress, these advances remain quite small when compared with the ubiquity of the US dollar, which is used in approximately 90 percent of foreign exchange transactions around the world, according to the Bank for International Settlements.
Regardless, it is still a fact that a number of nations have dumped their US Treasury bills and increased their gold reserves.
In March this year, the yuan managed to overtake the US dollar and become the most used currency for cross-border transactions in China. But who is leading the charge against the dollar to pay for oil, gas and even a nuclear power plant?
Countries using China’s yuan for trade
Russia – According to SCMP, China’s exports to Russia rose by 153.09 percent, while imports rose by 8.06 percent in April this year.
Saudi Arabia – A recent visit by President Xi Jinping to Saudi Arabia in December last year discussed a new paradigm for energy cooperation, and called for boosting the role of the yuan as a currency for trading in oil and gas.
Argentina – Officially the governemnt had stated that it would start to pay for Chinese imports in yuan rather than US dollars in April of this year.
Brazil – According to SCMP, Brazil has started to accept trade settlements and investments in yuan. Brazil’s yuan-denominated foreign-exchange assets reached a high of 5.37 per cent of the total by the end of 2022, surpassing euro assets to be the second-largest.
Bangladesh – Bangladesh and Russia have come to an agreement to use the yuan to settle payment for a nuclear plant that Moscow is building in the South Asian country, a Bangladeshi government official was quoted as saying in April. The transaction will be completed in yuan via the Cross-border Interbank Payment System.
Pakistan – Pakistan had made an order for up to 750,000 barrels of crude oil from Russia earlier this year. The payment may likely have been made in yuan rather than the US dollar due to Russia’s current economic difficulties.
Iraq – The Iraqi central bank said in February that it would allow for private sector imports to be paid off in yuan. The bank also mentioned that it would provide the Chinese currency to Iraqi lenders to pay their Chinese counterparts.
Thailand – Back in April, the Bangkok Post reported that the Bank of Thailand and the People’s Bank of China have held talks over additional cooperation to encourage businesses to use yuan-baht settlement for trade between the two countries.
Chinese yuan vs US dollar
In 2015, the Chinese government launched the Cross-Border Interbank Payments System, or CIPS. The move was aimed at facilitating cross-border payments in yuan.
By 2018, China had also launched the yuan-denominated crude oil futures contracts. This was set up to allow exporters to sell oil in yuan.
In July this year, Bolivia officially started to use the yuan to pay for imports and exports. Bolivia transacted 278 million Chinese yuan in the first half of 2023, which amounts to 10% of its foreign trade.
