Yuan’s Rise: China’s Currency Gains Global Traction

China’s yuan is experiencing a surge in global popularity as its usage in cross-border transactions reaches record levels. This year, the yuan accounted for 53% of China’s incoming and outgoing transactions in July, compared to roughly 40% in the same month of 2021, according to data from the State Administration of Foreign Exchange. The increased use of the yuan in cross-border payments stems from several factors, including closer economic ties with Russia, a strategy to decrease dependence on the US dollar, and a series of currency swap agreements with other nations. Notably, the yuan’s use saw a significant boost after US sanctions imposed on Russia limited its access to the dollar. This led to an increase in yuan-based transactions, financial dealings, and deposits, with Russia’s central bank governor Elvira Nabiullina noting a sharp rise in yuan usage. Additionally, China has established or renewed currency swap lines with Saudi Arabia, Argentina, and Mongolia, all major suppliers of commodities that China imports. The yuan’s international presence has been further bolstered by the establishment of new yuan clearing banks in Laos, Kazakhstan, Pakistan, Brazil, and Serbia. Some analysts attribute China’s efforts to maintain a stable yuan against the US dollar, despite pressures to sell the currency, to encouraging its trading partners to conduct more transactions in yuan. Chinese President Xi Jinping has repeatedly called for strengthening the yuan, highlighting its importance in bolstering the nation’s global economic influence.