June 5, 2014
It is the monetary equivalent of what Chairman Mao called “bombarding
the headquarters”. China’s renminbi is rapidly displacing the US dollar
as a trading currency not only in Asia and Europe but now also in the
US home market.
The value of renminbi payments between the US and the rest of the
world rose by 327 per cent in April this year from the same month a year
ago (see chart) as more US corporations switched to using the Chinese
currency to pay for imports from China, according to data from SWIFT,
the international currency settlement firm.
The reasons driving the upsurge are structural and long-term, said Debra Lodge, a managing director at HSBC in New York.
First, US importers can slash the cost of imports from China by
agreeing to trade in renminbi rather than US dollars, Lodge said.
Second, a recent surge in the popularity of a host of
renminbi-denominated financial market instruments are making it easier
for US corporates both to hedge currency risk and to earn an investment
return from the renminbi they hold.
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