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Yuan Rises to Global Prominence: Challenges US Dollar’s Dominance in International Payments

In an unprecedented shift in global finance, the Chinese yuan has ascended to record heights, becoming the fourth most used currency in global payments, as reported by the SWIFT Financial System. As of November, the yuan’s usage in transactions reached 4.61%, surpassing the Japanese yen, which dropped to 3.41%.

This development signifies more than just a numerical change; it reflects a considerable shift in the landscape of global currency usage. While the top three currencies – the US dollar, euro, and British pound – experienced slight dips in their shares, the collective change amounts to a noteworthy shift. The dollar’s share fell to 47.08%, the euro to 22.95%, and the pound to 7.15%.

Looking back over the past year, the yuan’s global share has almost doubled from its 2.37% stance in November 2022, marking a steady climb in its international presence. This rise aligns with Beijing’s strategic efforts to challenge the dollar’s dominance and position the yuan as a formidable global currency.

The year 2023 has seen significant moves to bolster the yuan’s international standing. Cross-border yuan lending surged to 28% last month, and the People’s Bank of China now boasts over 30 bilateral currency swap agreements with various central banks, including those of Saudi Arabia and Argentina.

Furthermore, the yuan recently usurped the euro’s position as the second most used currency in global trade finance, partly driven by Beijing’s lower interest rates that have made trade financing more accessible, according to the Financial Times.

Adding to this momentum, China and Russia have nearly eliminated the US dollar from their bilateral trade. Russian Prime Minister Mikhail Mishustin reported that over 90% of trade between the two nations is now conducted in either the yuan or the ruble.

These developments not only highlight the growing influence of the yuan in the global financial arena but also signify a potential shift in the balance of economic power. The increasing adoption of the yuan in international transactions reflects China’s expanding economic footprint and its ambition to reshape the global financial system. As the world watches these changes unfold, the yuan’s rise could have far-reaching implications for global trade, finance, and economic policies.