China’s currency, the yuan, ascended to a higher global status in 2014, with the value of cross-border payments by the currency accounting for 23.6 percent of total cross-border payments, according to a report on the globalization of the yuan released by the People’s Bank of China, the country’s central bank, on June 11.
Data from the Society for Worldwide Interbank Financial Telecommunication shows that the yuan became the second most used currency in trade finance—letters of credit and collections, the fifth most popular payment currency and the sixth most used foreign exchange currency in the world in December 2014.
In an effort to make the yuan an international currency in a real sense, China is pressing ahead with financial reforms so that the yuan can become part of the basket of currencies determining the value of Special Drawing Right (SDR), an international reserve asset created by the International Monetary Fund (IMF) in 1969.
Allocated to IMF members on the basis of their contribution to the fund, SDR represents a claim to foreign currencies for which it may be exchanged in times of need.
Currently, the SDR basket consists of four currencies—the U.S. dollar, euro, British pound and Japanese yen. The composition of the SDR basket is due for a once-in-five-year review this year. China has been seeking inclusion of the yuan so that the currency will be recognized as an international one. MORE