Yuan loses its gleam beyond Chinese borders

Yuan loses its gleam beyond Chinese borders


In 2009, when Beijing was given a privilegefor using Yuan beyond Chineseboundary, the analysts had believedit to eventually challenge the dollar’s pre-eminence in GLOBAL TRADE. An offshore market for the Yuan grew up at that time, mostly centered in Hong Kong.Nevertheless, raising the Yuan’s usage on global level was likely to be a long-term project.HSBC estimates released information that Yuan trading across Chinese borders dimensioned around US$ 22 billion/day – US$ 40 billion/day by the end of last year – a fraction of the US$ 5.3 trillion/day traded in global foreign exchange markets.So, are bad days ahead for Chinese Yuan when it already is losing its glamour across border transactions? Reason behind such origin certainly base upon Chinese government’s reluctance to loosen its grip on the currency, as so what traders complain.

As per an index compiled by Standard Chartered since late year 2010, Yuan lost most of its popularity beyond Chinese borders by 0.2% last year – a remarkable annual decline in its strength inspite of ticking up in January this year. Of which lead all payments (Mode: Yuan) to fall into a bear market with an approx. 21% decline of China’s total trade since last October – prior 30% recovery in January; however still down to 37% maximum estimated in August.

Not to mention, governmental issues and a lack of yuan-denominated assets in which to invest have discouraged non-Chinese companies from using the currency in trade with their Chinese partners. Keeping the current Yuan position on global index, Beijing’s recent heavy-handed market interventions have further reduced the currency’s appeal for foreigners.

The Chinese currency reached its highest level since early December last Friday in offshore TRADING, having lost 1.5% in the first few TRADING DAYS of the year.According to recent data received by the Society for Worldwide Interbank Financial Telecommunication, The yuan is used in less than 3% of global payments, far below the greenback’s 45% share

According to a trading firm, Ningbo United Group Import & Export Co.’s – mainly exports steel products and garments and imports coal and wood – finance director, Zhou Lin:

“Given the yuan’s volatility and the authorities’ murky policy intentions, it’s hard to see interest in using the currency among our customers. Demand for [yuan trade settlement] will only shrink further.”

As per estimates, his company comprises just 5% of its foreign trade in Yuan – of which include Chinese exports in South Korea and Japan. Meanwhile the rest of the mode of business is dominated by strong Dollar and Euro.

“When the market gradually goes back to a relatively normal state, yuan internationalization will continue moving forward.” – Zhou Lin

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I cover technology, utilities and biotechnology for Markets Morning, and I help out occasionally with other industry sectors. I've written about investment and personal finance topics for more than 20 years from a lowly copywriter to editor-in-chief, so I've done a little bit of everything. For what it's worth, I have a BA from Duke University and an MBA from Rollins College. I'm married with one daughter, and that's worth more than everything else put together.