Out-Law News 2 min. read

Use of yuan on the rise in South Africa-China trade, according to SWIFT


More than 30% of payments made between South Africa and Greater China now take place in Chinese yuan, according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

SWIFT said newly-released data from its ‘RMB Tracker’ showed that the number of South African payments made in yuan “increased by 33% over the last 12 months and by 191% over the last two years”.

In June 2015, 31.3% of direct payments by value between South Africa and China/Hong Kong were in yuan, compared to 10.8% in June 2014 and only 4.6% in June 2013, Swift said.

“In addition to direct flows between South Africa and Greater China, Swift data shows that nearly 70% of the number of payments between the latter is still intermediated by the United States, mainly in US dollars,” SWIFT said.

The Chinese currency “held its position as the fifth most active currency for global payments in value” in June 2015 and accounted for 2.09% of global payments, a slight decrease from 2.18% in May 2015, SWIFT said. Overall, yuan payments “increased in value by 9.26% in June 2015, whilst growth for all payments currencies was at 14.46%”.

SWIFT's head of Africa South, Hugo Smit said the rise of yuan usage in South Africa “is another good indicator of the cross border use of the currency”.

Smit said: “Much of this growth has to do with the strengthened bilateral relations between South Africa and China, which were renewed at the end of 2014 to include trade cooperation and sustainable investment opportunities between the two countries.” As a result, yuan usage in South Africa “should continue to grow at a good rate”, Smit said.

Chinese premier Li Keqiang told South Africa’s president Jacob Zuma last December that China would “encourage and support South Africa’s industries, as part of plans by the two nations to increase cooperation in sectors including equipment manufacturing, finance, and aviation.

The central banks of South Africa and China announced last month that they had signed an agreement to establish a yuan clearing business in South Africa. The South African Reserve Bank (SARB) said that under the terms of a memorandum of understanding with the People's Bank of China, the banks would “coordinate and cooperate on the supervision, oversight and clearing” of yuan in South Africa.

According to the SARB, China is currently South Africa’s largest export partner. The yuan clearing business “will be immensely valuable as corporates will benefit greatly” from trading and settling in yuan, the SARB said.

China’s state news agency Xinhua said the agreement represented the first yuan clearing arrangement in Africa.

SWIFT said earlier this year that the yuan had become one of the top five world payment currencies in terms of value since November 2014, overtaking both the Canadian dollar and the Australian dollar.

SWIFT's data said the rise in ranking for the currency followed nearly one year when it was “firmly positioned in seventh place”.

The managing director of the International Monetary Fund Christine Lagarde has said that the yuan is likely to be used more widely around the world in the aftermath of financial reforms. Lagarde said she had been “very impressed by the rapid internationalisation” of the yuan in recent years.

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