Renminbi steps further towards internationalisation

The use of the renminbi in international payments hit a record market share of 0.87% last month, growing more than threefold from 0.24% two years ago, according to Swift, an international payments platform.

China’s currency jumped to 11th in the ranking of world payments currencies in June, up from 20th place last January, according to a report from Swift. In the process, it overtook currencies such as the Thai baht and Norwegian krone.

The continuous growth in the popularity of the renminbi for payments comes from demands from some key markets, such as the UK, another incremental advance which further supports the international use of the Chinese currency.

The market is expecting that China will make further liberalisations, such as letting the renminbi trade in a wider band. Zhu Haibin, chief China economist at J.P. Morgan, has said that it is likely to happen before the end of this year.

“From June we saw strong capital outflow, which is believed to continue in the second half,” Zhu told reporters today. “If you notice recently that the difference between daily spots and middle prices has became narrow. The difference is no longer touching the low end of the trading band. If the daily spot moves closer to the middle price and continues to be close or below there, I think it’s a good window to further widen the trading band.”