Introduction to the Currency Conundrum
Despite China’s ambitious strides toward establishing a digital yuan, the nation has faced some serious speed bumps in its quest to mainstream its currency on the global stage. The numbers, as unveiled by SWIFT’s RMB Tracker, tell a story that’s a mix of optimism and reality.
Current State of the Chinese Yuan
As of January 20, reports showed that the Chinese yuan (CNY), also dubbed the Renminbi (RMB), managed a minuscule gain of 0.02% in international usage over a span of more than two years. From December 2018 to January 2021, this growth hardly sets the stage for a financial takeover! What’s even more disconcerting is the decline from 1.26% to 1.16% when comparing just November and December 2020.
China’s Increasing Frustration
It’s not a catastrophe, but for a country that has embedded the internationalization of the RMB in its economic DNA since 2009, this is like showing up to a party where you’re the only one not on the dance floor. Hong Kong, the cool kid in the currency block responsible for three-quarters of CNY settlements abroad, may be dragged into the mix, as tensions rise and the trade war gets messy.
The Dollar vs. the Yuan Face-off
SWIFT data paints a further bleak picture: the Chinese yuan dropped from 2.07% to 1.88% of global payments. This takes intra-Chinese use into account, and while SWIFT remains key for international dealings, China’s crusade has found a local alternative, the Cross-Border Interbank Payment System (CIPS), lurking in the background.
The Push for Global Presence
Claude Barfield of the American Enterprise Institute pointedly notes,
“The Chinese want to be not just important in terms of their domestic policy, but also in terms of their international policy.”
With the dollar continuing its dominant reign, China clearly isn’t one to sit idly by. Enter the digital yuan, touted as a potential rival by U.S. intelligence—imagine a currency showdown on a soap opera.
Pilot Programs Taking Flight
In an attempt to woo international users, China has been pushing pilot programs for its digital currency. Citizens have even gotten a taste of this digital cash via lottery, a promotional tactic sure to drum up interest. But let’s be real, while digital yuan is being tossed around like confetti at a parade, it still has a long way to go to match the prolific volumes processed through SWIFT.
SWIFT’s Response to a Changing Landscape
In light of this evolving narrative, SWIFT isn’t just sitting on its couch eating potato chips. They’ve recently introduced new instant cross-border payment solutions, likely catching flashes of competition in the corner of their eyes. Representatives for SWIFT, however, had not provided any comment to our friendly neighborhood reporters by time of publishing.
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