On August 22, data released by the Society for Worldwide Interbank Financial Telecommunication (Swift) showed that in July this year, the value share of RMB international payments rose to 4.74%, setting a new record since data was recorded.
Previously, data disclosed by the State Administration of Foreign Exchange showed that in July, foreign capital increased its net holdings of domestic bonds by US$20 billion, a month-on-month increase of 1.4 times, and overseas investors were still very active in allocating RMB assets.
The share of RMB in global payments hits a new high
The share of RMB in global payments continues to rise. The latest data disclosed by Swift shows that in July, the value share of RMB in international payments rose from 4.61% in June to 4.74%, which has been above 4% for 9 consecutive months and hit a new high since data was recorded; the ranking of international payments has remained fourth in the world for 9 consecutive months.
Swift noted that the value of payments in RMB increased by 13.37% in July compared to June, while the value of payments in all currencies increased by 10.29%.
The data also shows that in July, in the payment amount ranking of major currencies, the US dollar, euro and pound sterling ranked top three with shares of 47.81%, 22.47% and 7.00% respectively.
In July, the RMB's share as a global currency in the trade finance market reached 6%, surpassing the euro's 5.83% and second only to the U.S. dollar.
Recently, the international influence of the RMB has increased significantly, and its "circle of friends" has further expanded. Specifically, on August 19, the People's Bank of China and the State Bank of Vietnam formally signed a memorandum of understanding on cooperation, aiming to deepen cooperation between the two countries in the fields of local currency settlement, swaps, and cross-border payment connectivity. Previously, on May 21, the People's Bank of China reached a similar agreement with the Bank of Thailand to promote bilateral local currency transaction cooperation.
What is particularly striking is that the RMB Cross-border Payment System (CIPS) is increasingly favored by global financial institutions. According to statistics, in July alone, the CIPS system added 2 direct participants and 6 indirect participants (including 1 domestic institution and 5 overseas institutions), showing the rapid expansion of the system on a global scale. As of the end of July, the CIPS system has 150 direct participants and 1,401 indirect participants around the world, covering 117 countries and regions in Asia, Europe, Africa, North America, Oceania and South America, with a business network through more than 4,700 There are legal person banking institutions in 184 countries and regions around the world.
In terms of cross-border RMB business, the latest report released by the People's Bank of China shows that the business continues to maintain a growth trend. In the first half of the year, the total amount of cross-border RMB receipts and payments reached 30.6 trillion yuan, a year-on-year increase of 25%, achieving a basic balance of receipts and payments. Among them, the amount of cross-border RMB receipts and payments under the current account was 7.7 trillion yuan, a year-on-year increase of 22%, including 5.9 trillion yuan in goods trade receipts and payments and 1.8 trillion yuan in service trade and other current account receipts and payments; while the amount of RMB receipts and payments under the capital account reached 22.8 trillion yuan, a year-on-year increase of 26%.
Faced with the uncertainty of the international financial market, the People's Bank of China reiterated its exchange rate policy stance, that is, adhering to the market supply and demand as the basis, adjusting with reference to a basket of currencies, and implementing a managed floating exchange rate system. The bank emphasized that it will give play to the decisive role of the market in the formation of exchange rates, stabilize market expectations through comprehensive measures, resolutely correct pro-cyclical behavior, prevent the formation of unilateral consistent expectations and self-reinforcement, so as to effectively prevent the risk of overshooting of the exchange rate and maintain the basic stability of the RMB exchange rate at a reasonable equilibrium level.
Foreign capital actively allocates RMB assets
Recently, data disclosed by the State Administration of Foreign Exchange showed that in July, foreign capital net increased its holdings of domestic bonds by US$20 billion, a month-on-month increase of 1.4 times.
The State Administration of Foreign Exchange pointed out that the situation of cross-border capital flows improved in July, and the supporting role of major inflow channels such as goods trade was further enhanced. In July, banks' foreign-related income on behalf of customers increased by 9% month-on-month, expenditure increased by 7%, and the deficit narrowed by 41% month-on-month. Among them, my country's foreign trade continued to grow rapidly, driving the net inflow of cross-border funds under goods trade to increase by 48% month-on-month, the highest level in the same period in history; foreign capital net increased its holdings of domestic bonds by US$20 billion, a month-on-month increase of 1.4 times, and overseas investors' enthusiasm for allocating RMB assets remained high.
The State Administration of Foreign Exchange said that in the future, as the internal and external environment improves, the positive factors for the smooth operation of my country's cross-border capital flows will further increase. From an internal perspective, the Third Plenary Session of the 20th CPC Central Committee made systematic arrangements for further deepening reform and promoting Chinese-style modernization, which effectively boosted market confidence, and the domestic economic recovery will be consolidated and strengthened; reform and opening up in the foreign exchange field continued to deepen, and the resilience of the foreign exchange market will continue to improve. From an external perspective, international trade is expected to resume growth. The World Trade Organization expects that the volume of global trade in goods will turn from a decline of 1.2% in 2023 to an increase of about 2.6% in 2024. At the same time, expectations of a rate cut by the Federal Reserve have increased, and major non-US currencies have stabilized and rebounded recently, and the international foreign exchange market environment is expected to gradually improve.
Huatai Futures pointed out that China's foreign exchange settlement and sales deficit widened in July, but the bank's foreign-related receipts and payments deficit narrowed, and the current account turned from a deficit to a surplus. This shows that the increase in the surplus in goods trade has provided support to the foreign exchange market. Despite the continued deficit in foreign exchange settlement and sales, the growth in the market's spot inquiry transaction volume and forward transaction contract value shows that market participants have increased confidence in the RMB exchange rate. The RMB exchange rate may be supported by these positive signals. In particular, the increase in the contract value of forward settlement and sale of foreign exchange suggests that enterprises are optimistic about the outlook for the RMB exchange rate. This confidence may ease the pressure of some foreign exchange settlement and sale deficits and help stabilize or slightly appreciate the RMB exchange rate against the US dollar.
Ping An Securities said that since late July, as the market's expectations for the Fed's rate cut and the Bank of Japan's rate hike have become stronger and market volatility has increased, global carry trades have seen large-scale liquidation, and the onshore RMB exchange rate against the US dollar has risen from around 7.27 to 7.17, appreciating by about 1,000 points. The RMB appreciation pulse brought about by the narrow carry liquidation has ended, and it is recommended to pay attention to the settlement and sale of foreign exchange in the private sector. In addition, Nanhua Futures said that after the rapid appreciation of the RMB, the pressure of net outflow of cross-border funds in July was relieved, and the corporate settlement rate increased, but the market still had differences on the future market, and further observation of variable factors was needed.
