source from:FT
July 21, 2016 7:56 am
Renminbi drops to sixth in international payment ranking
Gabriel Wildau in Shanghai

The renminbi slipped in the global league tables for cross-border payments in the first half of 2016, as concern over depreciation dented investors’ willingness to hold the Chinese currency.
The Canadian dollar surpassed the renminbi to take fifth place among all currencies for use in international payments with a 1.96 per cent share compared to 1.72 per cent for the renminbi. The US dollar, euro, sterling and yen hold the top four spots.


China’s slip down the ranks comes after its central bank has spent more than $470bn from its foreign exchange reserves to curb depreciation. On Monday the renminbi closed its weakest end-day level since September 2010. Its weakness accelerated after the People's Bank of China’s surprise move last August to allow the currency to depreciate sharply by changing the way it sets is daily guidance for the exchange rate.
The renminbi hit a record-high cross-border payments share of 2.79 per cent in August 2015, but its share has since decreased, according to data released on Thursday by the Society for Worldwide Interbank Financial Telecommunication (Swift). Within Asia Pacific, the renminbi dropped behind the Japanese yen for international payments involving China and Hong Kong.
“Offshore renminbi usage has most likely been negatively impacted by the volatility in the Chinese market and the slowdown of Chinese economy,” Swift said.
Among the 12 biggest offshore renminbi clearing centres, excluding Hong Kong, nine posted annual drops in renminbi payment volume in the first half of 2016. UK payments grew 7 per cent, reclaiming the top spot from Singapore, where payments fell 37 per cent. France, Germany, Switzerland and Australia all posted falls.
Renminbi payments continue to grow in absolute terms, but the redback’s ranking has fallen because other currencies have grown faster. Cross-border renminbi payments grew 0.2 per cent in June in value terms from May, while payments across all currencies increased by 10.3 per cent.

Despite its drop in the league tables, most economists believe that the long-term trend of increased international use of the renminbi remains intact. In the first phase of renminbi internationalisation, which began in 2010, most international payments were for trade settlement. Exporters to China were happy to receive renminbi payments because they expected appreciation.
Raymond Yeung, chief China economist at Australia and New Zealand Banking Group, points out that expectations of renminbi depreciation — combined with falling renminbi interest rates — creates new incentives to use the renminbi for investment-linked payments. Chinese companies investing abroad have typically borrowed in foreign currency to fund their acquisitions, but in the future they will shift to renminbi borrowing, he says.
“In past years, people were attracted by the appreciation of the renminbi to use it as an asset currency. Now we’ve noticed the renminbi is increasingly becoming a liability currency,” he said. “Everyone knows the yen is a carrying currency. If China runs into a liquidity trap such as Japan, people will borrow renminbi onshore and send it offshore for investment.”