Chinese RMB in global reserves and global settlements – an expanding function but limited

chiny24.com 1 month ago

1. RMB in abroad exchange reserves – slow but unchangeable growth

Though the US dollar loses meaning and the yen and gold gain, Chinese renminbi (RMB) It inactive remains a niche currency in global reserves, but its share is increasing steadily. According to IMF data:

RMB's share of global reserves is about 2.5–3% (data for 2024), which puts it behind the dollar (57.8%), euro (20%) and yen (5.8%).
China itself limits RMB globalisation – they hold capital control, which hinders the free movement of currency.

However, any countries (e.g. Russia, Pakistan, Argentina) increase RMB's share of reserves, mainly due to:

Avoidance of US sanctions – Russia after 2022 switched to RMB settlements in trade with China.
Greater assurance in the Chinese economy – despite the slowdown, China remains a non-threatening second largest economy in the world.

2. global clearances in RMB – growth in trade, but mainly regionally

China has been promoting for years internationalisation of RMBbut the process is slow. Key data:

Around 3–4% of global payments (SWIFT, 2024) takes place in RMB – this is an increase from about 1–2% in 2015, but inactive far behind the dollar (40%) and the euro (30%).
In China's trade with partners RMB's share reaches 15-30% – for example, in exchange with Russia or any African countries.
Chinese ‘exchange swaps’ – Beijing has signed a abroad exchange agreement (so-called swaps) with more than 40 central banks (including South Korea, Argentina), which facilitates settlements in RMB.

3. Why doesn't RMB replace the dollar quickly?

Capital control – China does not let full exchangeability of RMB, which discourages investors.
Political risk – The West fears dependence on the Chinese financial system, especially after experience with Russia.
Lack of liquidity – The RMB bond marketplace is inactive tiny compared to the dollar or the euro.

RMB is the currency of the future, but inactive niche

China gradually increases the function of RMB in trade and reserves, but No financial reforms and geopolitical tensions slow this process down. In East Asia, the yen remains a safer alternative, while RMB gains mainly among countries avoiding the dollar for political reasons (Russia, Iran). The full internationalisation of RMB would require the beginning of the Chinese capital marketplace – for which Beijing is not yet ready.

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