China’s drive to widen global use of the renminbi has been boosted by the Iran war, with adoption of Beijing’s cross-border payment system surging since the conflict erupted.
The average daily value of transactions settled through China’s cross-border interbank payment system (Cips) hit a record of Rmb920.5bn ($135.7bn) in March, according to state media.
It briefly rose even higher at the start of April to as much as Rmb1.22tn with almost 42,000 transactions in a single day before transaction volumes fell back.
The surge in the use of Cips, which Beijing introduced in 2015 to offer clearing and settlement of cross-border transactions in renminbi as an alternative to western-based payment systems, has prompted speculation that the Chinese currency is increasing its share of the global oil trade.
Cips data does not offer breakdowns of the types of goods being traded, but Russian energy export revenues almost doubled in March to $19bn compared with February, according to the International Energy Agency. Export revenues rose again last month to $19.2bn. Analysts at Citi said a “golden window” for international renminbi usage was opening, “driven by geopolitical shifts”.
Although the renminbi’s share of global oil trading remains relatively small compared to the dollar, experts say its role is growing steadily, supported by China’s position as the world’s largest oil importer and by alternative financial mechanisms such as gold conversion through the Shanghai Gold Exchange.
However, analysts also note that significant barriers remain before the renminbi can seriously challenge the dominance of the US dollar in global energy markets, including China’s capital controls and the limited international use of yuan-based financial instruments.
Source: FT.com