China’s dream of making the yuan a global currency hit by Hong Kong protests, depreciation, analysts say

The yuan slipped to the sixth most-used international transaction currency in July, behind the Canadian dollar, according to financial messaging service provider Swift

Chinese authorities have let the yuan’s exchange rate depreciate by about 15 per cent against the US dollar since the onset of the US trade conflict in March last year

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The yuan’s share in international payments dropped to 1.81 per cent in July from 1.99 per cent in June, slipping behind the Canadian dollar as the sixth most-used international transaction currency. Photo: AFP

Published: 12:56pm, 30 Aug 2019Updated: 11:38pm, 30 Aug 2019

Global payment transactions in July involving the Chinese yuan dropped to the lowest level since October 2018 as the Hong Kong protests, reduced global trade flows and its depreciation since the spring hinder offshore use, analysts said.

The yuan’s share in international payments dropped to 1.81 per cent in July from 1.99 per cent in June, slipping behind the Canadian dollar as the sixth most-used international transaction currency, according to financial messaging service provider Swift.

The yuan’s use was far behind the US dollar, which accounted for 40 per cent of international payments, the euro at 34 per cent as well as the British pound and the Japanese yen.

Transaction conducted in or through Hong Kong accounted for three quarters of the yuan’s offshore use, but 13 weeks of anti-government protests and the impact of a deepening US-China trade war have delivered a double blow to Beijing’s strategic plan to make the yuan a widely used international currency, according to analysts.

Xia Le, a Hong Kong-based economist for Spanish bank BBVA, said the protests in Hong Kong had cast a shadow on the local economy, particularly the retail and tourism businesses that often accept the yuan as a payment method from visitors from mainland China.

“The unrest in Hong Kong lowered the yuan’s use because the yuan was quite widely used in the city,” Xia said. “Now tourists are gone, and the yuan’s use will be affected.”