The report highlights the challenge for China as it seeks to internationalize its currency and open up its capital markets. Premier Li Keqiang is pushing for the yuan to be added to the International Monetary Fund’s basket of four reserve currencies, aiding the nation’s attempts to contest the dollar’s dominance in global trade and finance.
The London-based lender, which interviewed 1,610 businesses worldwide with at least $3 million in annual sales, said 17 percent of those surveyed were using the yuan to settle transactions, down from 22 percent a year earlier. Usage in Germany slid to 7 percent from 23 percent and in France fell to 10 percent from 26 percent. China’s currency has strengthened 26 percent against the euro over the past 12 months.
More than half of Hong Kong companies are using the yuan in cross-border business, the highest in the 14 markets surveyed by HSBC from Jan. 7 to Feb. 12. The city was followed by Taiwan and mainland China, which have usage rates of 38 percent and 35 percent, respectively.
China is making the yuan more convertible under the capital account and hopes it can be included in the IMF’s basket of reserve currencies, People’s Bank of China Governor Zhou Xiaochuan told IMF managing director Christine Lagarde at a forum in Beijing on Sunday. The composition of the basket, which includes the dollar, euro, pound and yen, is reviewed every five years and in 2010 the IMF said the yuan couldn’t be added because it wasn’t freely usable.
The adoption of the yuan for trade settlement continues to rely on China’s macro-economic stability and the development of its capital markets, HSBC’s Cheung said.
Some 54 percent of companies interviewed this year said they expected an increase in cross-border business with China, compared with 59 percent in the 2014 survey. The yuan has declined less than 0.1 percent against the greenback this year, after a 2.4 percent drop in 2014 that followed four consecutive years of appreciation. The Chinese currency has gained over the past 12 months against all the other 16 major global currencies tracked by Bloomberg.
The yuan overtook Canada’s dollar as the world’s fifth most-used currency for global payments in December, according to figures from the Society for Worldwide Financial Telecommunications. China will start a yuan international payment system later this year that will allow 24-hour settlement, Chen Xingdong, the Beijing-based chief China economist at BNP Paribas SA, said in a March 18 phone interview.