Is the Chinese yuan ranked fourth or second in international currencies?

In the latest July data from Swift, both rankings are mentioned. The global payment share that we usually pay attention to has reached 4.74% for the Chinese yuan, following the US dollar, euro, and pound sterling, and continues to surpass Japan to rank fourth.

Since the end of last year, we have surpassed Japan. Now our share is 4.74%, and Japan's share is 3.62%. The gap between the two is gradually widening, and it seems that our fourth place is now relatively stable.

However, this data also mentions another ranking that is equally important, which is the ranking of global currencies in cross-border trade. The only opponent left in front of China is the US dollar, currently ranking second globally.

In July, China's share reached 6%, while the euro's share was 5.83%, with the Chinese yuan surpassing the euro. The proportion of other currencies ranked after the fourth position is even lower, such as the yen in fourth place with only 1.46%, which temporarily cannot pose a threat to the euro and the Chinese yuan.

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What are the differences between the two sets of data?

Simply put, the former data on international payments includes the latter data on cross-border trade, encompassing not only cross-border trade but also direct investment and other financial investments.

In this cross-border trade data, we also observe that although the pound sterling, Hong Kong dollar, and Singapore dollar rank in the top 10 in international payments, they disappear in the cross-border trade data.

This also illustrates that as global international financial centers, London, Hong Kong, and Singapore have helped these three currencies secure a lot of investment shares. However, if we set aside investments and look only at cross-border trade, these three currencies would not make it into the top 10.

The fact that the Chinese yuan can go from being fourth in international payment shares to second in cross-border trade fully demonstrates that we are now increasingly using the Chinese yuan in trade.How can we further enhance our position?

Firstly, looking from the perspective of cross-border trade, although the RMB ranks second, its share is only 6%, while the US dollar accounts for a staggering 83.22%. This means that we should strive to capture a larger share from the US dollar's dominance.

However, the challenge in this area is significant. Why do we say that?

The high proportion of the US dollar in cross-border trade is primarily due to the fact that many bulk commodity transactions are settled in US dollars.

Grain transactions are settled in US dollars, but the United States is the largest global exporter of grain. Oil is also settled in US dollars, and currently, Middle Eastern countries still predominantly use the US dollar.

Australia is the largest exporter of iron ore, and of course, it uses the US dollar, but we are the largest importer of iron ore and can work towards persuading Australia to use the RMB for some transactions.

Another favorable condition comes from Russia, which is also a major exporter of grain and energy and has already extensively used the RMB in its trade with us.

From the above analysis, it is clear that changing the settlement status of the US dollar in bulk commodity transactions in the short term is impossible, but this is a direction we can work towards.

Secondly, we can explore ways to enhance our payment status in financial investment, which requires us to have international financial centers similar to Tokyo, London, and New York, and we also need to genuinely improve the investment value of China's A-shares.