Yuan surges up currency rankings
Use of mainland currency in trade makes it No2 payment type between China and rest of world
"Hong Kong has the most-established and largest [yuan] corridor with mainland China, but as other financial centres such as London, Singapore and Frankfurt establish the necessary infrastructure and agreements to support [yuan] transactions, we will see the [yuan] grow significantly in these markets," he said.
Swift operates the world's largest network facilitating the transfer of financial messages between banks.
The market share of yuan usage in payments between entities based in mainland China, Hong Kong and outside rose 36 per cent last month from a year ago. The US dollar remains in the top spot, while the Hong Kong dollar stands in third place.
Overall, the yuan held its position as the seventh most used global payments currency and accounted for 1.47 per cent of global payments, up from 1.43 per cent in April.
Europe has seen the strongest year-on-year growth in yuan payment value. Firms in the euro zone chose to pay in yuan in 29 per cent of transactions with mainland China and Hong Kong, up from 19 per cent. In European countries that do not use the euro, the ratio rose to 38 per cent from 25 per cent.
Over the past year, yuan usage has expanded sharply in London, Singapore, Luxembourg, Paris and Frankfurt. Beijing has allowed London and Frankfurt to have a local yuan clearing bank, which spurred the formation of a yuan foreign exchange trading centre in the two cities and boosted the usage of yuan settlement in trade finance.
Another example is the renminbi qualified foreign institutional investor scheme, which allows foreign asset management firms to invest in onshore securities.
"Creating these hubs in Frankfurt and London to support [yuan] trading will promote greater use of the currency for global trade and finance across the region. As the use of the [yuan] grows, we expect more market centres to take notice of the [yuan] as a world payments currency," Raes said.
