Chinese banks are ramping up efforts to promote international use of the yuan, and reporting a surge in cross-border yuan business from the country’s booming trade with Russia and deepening ties with the Middle East.
Harbin Bank Co, in China’s Heilongjiang province neighboring Russia, saw its cross-border yuan business grow nine-fold last year to a record, as the Sino-Russia trade grew briskly after the Ukraine war began.
China Construction Bank and Agricultural Bank of China (AgBank) reported total assets at their Moscow subsidiaries jumped 3.3 times and 1.4 times, respectively, in 2022, while Russia was put under harsh western sanctions.
Admittedly the growth came off a low base, but these small steps in yuan adoption come after a string of bilateral deals by China with its trade partners, such as its oil purchases from the Gulf and other trade with Brazil and Russia.
The yuan’s share of global payments is merely 2.5 percent, and tiny compared with US dollar’s 39.4 percent and euro’s 35.8 percent, according to SWIFT, the global payment messaging system controlled by the West.
But Reuters analysis of banks’ latest filings shows how the one-year-old Ukraine war that led to Russia being kicked out of the dollar system, is revving up China’s efforts to extend the plumbing for an alternative currency system.
“China should prepare for the worst-case scenario of being excluded from SWIFT, and actively promote cross-border use of the yuan,” Wang Jiehua and Qiao Liqun, executives at Harbin Bank, wrote recently in a publication affiliated to China’s central bank.
h/t OCCAM’S RAZOR