Good News! Lower Exchange Costs, These 30+ Countries Can Now Settle in RMB

Mar 30, 2023 | News

According to recent data, as of December 2022, the renminbi maintained its third place in the global cross-border trade value, accounting for 3.91% of the total, after the US dollar and the euro, so a growing number of countries are considering the use of the renminbi in settling trade.

These include Russia, Brazil, Iran and 27 other countries.

Russia: On March 22, Russian President Vladimir Putin stated that Russia is ready to use the renminbi for foreign trade settlements with other countries, according to Russia Today (RT). The latest report released by the Bank of Russia shows that the renminbi’s share in Russia’s import settlements jumped from 4% in January 2022 to 23% by the end of 2022, and the renminbi’s share in Russia’s export settlements soared from 0.5% to 16%.

Brazil: According to Brazil, trade between Brazil and China exceeded US$100 billion for the fifth consecutive year as of 2022, making China Brazil’s largest trading partner for 14 consecutive years. According to statistics from China Customs, bilateral trade between China and Brazil stood at US$171.49 billion in 2022, up 4.9% year-on-year. In February this year, the People’s Bank of China and the Central Bank of Brazil signed a memorandum of cooperation to establish a RMB clearing arrangement in Brazil.

Iran: The renminbi already accounts for a significant proportion of trade between China and Iran and negotiations are now underway to liberalize its use. As of January 2023, upwards of 26 million tonnes of Iranian oil has arrived in China, and the RMB is the main current money used in transactions.

The RMB has also gained wider recognition in terms of its reserve function. In May last year, the International Monetary Fund (IMF) raised the weight of the renminbi from 10.92% to 12.28% in its five-yearly review of the Special Drawing Right (SDR) fixing, continuing to hold third place in the currency basket behind the US dollar and the euro. The data also shows that the scale of cross-border RMB use has steadily increased in recent years under the active promotion of the relevant authorities.

This policy reform is a good hedge against exchange rate risks, which will make foreign trade transactions with these countries more direct and reduce the cost of exchange and trade financing, as well as proving the rising status of the RMB as an international currency. China’s import and export trade will see more trade opportunities on the world stage, supported by the premise that more countries and regions are “RMB settlement-focused”.

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