In recent years, most global trade has been settled in U.S. dollars. However, with the continued collapse of the U.S. dollar and the increasing number of sanctions, more and more countries are turning to RMB settlement.
Statistics show that currently 30 countries, including Russia, Iran, the United Arab Emirates, Dubai, India, Singapore, Venezuela, Turkey, and Indonesia, have gradually turned to the use of RMB in trade settlement or investment.
Russia
Russia has recently begun to announce that it will readjust the allocation of foreign exchange reserves, especially to empty its euro reserves, and to determine that the RMB will be the only foreign exchange reserve in subsequent foreign trade. Russia’s choice of RMB as its only foreign exchange reserve fully demonstrates the significant improvement in the international status of China’s economy and trade. The RMB is supported and recognized by more and more countries around the world.
Brazil
Brazil is the largest country in Latin America. In early February, the People’s Bank of China and the National Bank of Brazil signed a memorandum to establish a RMB settlement center in Brazil. In the future, trade between China and Brazil will be settled in RMB. This means that we have taken another solid step towards the internationalization of the RMB. This move will help enterprises and financial institutions in China and Brazil use RMB for cross-border transactions, making bilateral trade and investment more convenient.
iran
Iranian President Raisi, who just visited China, also discussed increasing the share of local currency settlement with China. Iranian Economy Minister Handouzi said that RMB already accounts for a large proportion of the trade between China and Iran, and they are now negotiating how to relax the use of RMB. As of January 2023, more than 26 million tons of Iranian oil have been shipped to China in the past two years, and the RMB is the main common currency in transactions.
Cambodia
China is Cambodia’s largest trading partner and the main source of foreign direct investment and foreign tourists. In order to grasp China’s reopening policy and further attract Chinese investment and tourists, tourism operators are allowed to receive RMB directly. At the same time, the National Bank of Cambodia applied to join the Chinese RMB Cross-border Payment System (CIPS) and also allows Chinese tourists to use Chinese electronic payment services within the country. . Xie Silei, assistant governor of the National Bank of Cambodia, previously stated at a press conference that applying to join CIPS is a well-thought-out move, which will bring many benefits to Cambodia, including reducing settlement costs in Cambodian riel and RMB, strengthening Cambodia’s Bilateral trade, investment and tourism cooperation with China, as well as promoting regional economic integration.
iraq
Iraq will join major Middle East economies such as Saudi Arabia and the United Arab Emirates in further exploring opportunities to use currencies other than the U.S. dollar in trade. In recent years, the scale of cross-border RMB use has steadily increased. According to SWIFT statistics, in December 2022, the RMB ranked third in global cross-border trade volume, accounting for 3.91%, nearly double the same period in 2021, second only to the US dollar and the euro. In December last year, “World Supermarket” Yiwu and Saudi Arabia completed the first cross-border RMB payment business: Yite Network Technology Co., Ltd. in the fourth district of Yiwu International Trade City received cross-border RMB payments from customers in Saudi Arabia through “Yi Pay” . Saudi Finance Minister Mohammed al-Jadaan said at the 2023 Davos Forum in January that Saudi Arabia is willing to use non-USD currencies for oil transactions. The “Arab Businessman” website stated that currently, the Saudi riyal is pegged to the U.S. dollar, and Saudi Arabia is opening up transactions in non-dollar currencies. This plan may allow the riyal to be pegged to a basket of currencies. Many analysts believe that this may be a “oil The beginning of the end for the dollar. In terms of its reserve function, the RMB has also gained wider recognition. In May last year, the International Monetary Fund (IMF) raised the weight of the RMB from 10.92% to 12.28% in the five-year valuation review of the Special Drawing Rights (SDR), maintaining its third place in the currency basket, second only to in US dollars and euros. Data show that in recent years, with the active promotion of relevant departments, the scale of cross-border RMB use has steadily increased. In 2022, the cross-border RMB settlement amount of trade in goods will be 7.92 trillion yuan, a year-on-year increase of 37.3%, and the cross-border RMB settlement amount of direct investment will be 6.76 trillion yuan, a year-on-year increase of 16.6%. According to SWIFT statistics, in December 2022, the RMB ranked third in global cross-border trade volume, accounting for 3.91%, nearly double the same period in 2021, second only to the US dollar and the euro.
With the support of more and more countries and regions that “center on RMB settlement”, China’s import and export trade will usher in more trade opportunities on the world stage.
For foreign traders, the most direct and important benefit of using cross-border RMB to receive payment is that it can avoid exchange rate risks. In the current environment where RMB appreciation is generally predicted, risk hedging through cross-border RMB has become even more important.
Another benefit of using cross-border RMB is that cross-border RMB can save exchange costs and trade financing fees, thereby reducing financial costs.
For example, when doing business with Indonesia, Thailand, Myanmar, Argentina, Cambodia and other countries, if the quotation is quoted in US dollars, the exchange rate difference for a single transaction is inevitable, because the exchange rates announced by the central banks of these countries, the exchange rates announced by customs and the private exchange rates are different. of.
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