The yuan gains ground among foreign companies according to the Bank of China

A currency does not become strong just because its price rises, or because its leaders say so. It is also reflected in the decisions made every day by companies trading globally. This major change in the habits of international economic players is precisely revealed by a new survey carried out by the Bank of China. The yuan, a currency of recognition, is gaining popularity among a growing number of foreign companies. Published in a context of search for alternatives to traditional financial circuits and Beijing's international ambitions, this study reveals increased confidence in the Chinese currency.

Foreign companies increase their use of the yuan

The survey published by the Bank of China highlights a significant evolution in the place of the yuan in international trade. While geopolitical tensions and changes in global trade are encouraging many companies to diversify their payment tools, the Chinese currency appears to be a means of payment now preferred by a growing number of foreign economic players. The survey watch that this trend is no longer limited to a few allied or privileged countries of Beijing, but concerns a significant proportion of companies active in cross-border trade.

This progression is all the more remarkable as it occurs within a global economic environment characterized by uncertainties. The yuan is now seen by the companies surveyed as the currency that can support them in the long term in their commercial operations with China. Thus, the study conducted by the Bank of China provides a precise overview of the evolution of payment and financial management practices of foreign companies operating with the second largest economic power in the world.

The main lessons from the investigation are as follows:

• 95% of foreign companies surveyed plan to maintain or increase their use of the yuan in cross-border settlements;
• 34.5% anticipate an increase in their use of the Chinese currency;
• 61.4% plan to maintain a stable level of usage;
• Only 4.1% plan to reduce their use of the yuan;
• The study is based on responses from 3,501 companies, including 2,488 Chinese companies and 1,013 foreign companies.

The yuan is gradually gaining ground in international trade

More broadly than the simple raw figures of the survey, the results reflect an evolution in international commercial practices that is slow to take place. The use of the yuan is no longer limited to Chinese companies or their closest partners. And more and more foreign players seem to see the currency as a relevant tool for their transactions with the world's second largest economy. This trend is also reflected in the growing interest of companies to maintain their own liquidity in yuan instead of converting all their money into other currencies.

Such a trend also reflects the economic weight of China, an influential member of the BRICS alliance, in global supply chains. For many companies, the use of the yuan can simplify certain commercial operations linked to imports, exports or payments with Chinese partners. Thus, data from the Bank of China show that the yuan is gradually gaining legitimacy as an operational currency in international trade. This increase shows, without disrupting the global monetary balance in the short term, an expansion of the role of the Chinese currency in the daily activities of companies engaged in international trade.

Beijing pursues its ambition to make the yuan a global currency

These results are part of the very long-term strategy implemented by the Chinese authorities. For several years, Beijing has launched numerous initiatives aimed at strengthening the international presence of the yuan and increasing its use in trade, investments and financial markets. President Xi Jinping has repeatedly expressed this ambition, calling for the construction of a “strong currency”which could be “widely used in international trade, investment and foreign exchange markets, and achieving reserve currency status”.

Thus, Pan Gongsheng, governor of the People's Bank of China, defends also this orientation. The internationalization of the yuan is, according to him, “an essential component of China’s overall reform and opening-up process”. This statement shows how strategic the currency is in Chinese economic development. The objective is not only to facilitate trade, but also to strengthen the country's financial influence internationally. Additionally, the development of cross-border yuan payment systems and efforts to encourage the use of the currency abroad are moving in the same direction.

The survey published by the Bank of China therefore sheds concrete light on what has been obtained so far. The dollar remains dominant in international trade, financial markets and central bank reserves. However, the data collected shows that the yuan continues to gain ground with a growing number of foreign companies. This development alone is not enough to bring about a new world monetary order, but it shows that the Chinese currency is asserting itself in areas where its presence was previously limited.