The Chinese yuan has surpassed the US dollar in cross-border transactions in China, reaching a record high of 48% in March 2023. This is according to an analysis by Bloomberg Intelligence (BI) using statistics from the State Administration of Foreign Exchange. In contrast, the US dollar's share has decreased from 83% to 47% in the same period. However, this is based on the volume of all transactions, including trading securities through connections between the financial markets of Hong Kong and China.
The increase in yuan usage is attributed to China opening up its capital account, with rising inflows for China bonds and outflows for Hong Kong stocks, according to Stephen Chiu, chief Asia foreign-exchange and rates strategist at BI. In a bid to further promote international commerce, the State Council has announced that China will expand the use of the yuan for cross-border transactions.
Despite the yuan's growth, experts believe that it has a long way to go before disrupting the US dollar's dominance. According to SWIFT, the yuan's share of international payments was unchanged in March at 2.3%, despite the Chinese yuan weakening against the US dollar. Former Treasury Secretary Larry Summers also dismissed notions of the yuan being a threat to the dollar, citing China's unreliable markets and the strong desire to move capital out of the country.
