The Chinese currency has strengthened its position as the second most used currency in documentary credit transactions following the US dollar.
The renminbi’s activity share for documentary credits, including inbound and outbound letters of credit and documentary collection, accounted for 9.43 per cent of the world’s total as of the end of January, from 7.32 per cent two years earlier.
Letters of credit refer to a document from a bank guaranteeing that a seller will receive payment in full as long as delivery conditions are met. Documentary credits are used for similar purposes but banks do not guarantee payment.
The US dollar remains the leading currency for global documentary credits, with a share of nearly 80 per cent.
According to SWIFT, in January, China, Singapore and Hong Kong were the top three economies using the yuan as the currency for documentary credits, handling nearly 95 per cent of all RMB documentary credit transactions worldwide in terms of value.
They were followed by Macau and Taiwan with 0.88 per cent and 0.86 per cent respectively.