Payments in yuan easing off in the US

Source:Reuters Published: 2013-1-23 23:38:01

Yuan transactions in the US slid by 38 percent in December from November, making 2012 a flat year for growth of the Chinese currency in the world's largest economy, global transaction services organization SWIFT said Wednesday.

"We expect that most US flows we currently see in yuan are non-trade related and are subject to more variability than countries with strong underlying trade flows, so this is not unexpected," Lisa O'Connor, yuan director for the organization, said in its latest report.

As a currency for payments, the yuan needs to overcome a number of challenges including inertia and systems set up to invoice only in US dollars, she noted.

The Chinese government has been stepping up its efforts to promote wider use of its currency globally through bilateral currency swaps and trade settlement deals, aiming for the yuan to match China's rising clout as the world's second-largest economy.

But analysts say it may prove difficult for the US to widely adopt the "redback", since broader use of the yuan as well as the enhanced economic status of China will pose a threat to the world's No.1 economy and its currency.

"I don't think the US has the incentive to help promote the internationalization of the yuan, since they worry China will become a threat if the yuan can be used more widely," said Chi Lo, BNP Paribas' senior strategist for China.

As for US companies, some may also be reluctant to use the yuan if they do not expect rapid development and adoption of the Chinese currency by other companies and countries in the coming years.

The US represented 4.1 percent of yuan payments by value in December, compared with 6.6 percent in November, SWIFT data showed.



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