The latest RMB Tracker from SWIFT shows that during the last two years to September 2016, seven new countries are now using the Chinese renminbi (RMB) for more than 10 per cent of their direct payments by value with China and Hong Kong, bringing the total to 57 countries worldwide.

The trend towards increased used of the Chinese currency, particularly in Asia, is likely to be reflected in trends of RMB-denominated letter of credit (L/C) transactions.

Milestone reached

The 10 per cent milestone, also known as 'crossing the RMB river', is a threshold set by SWIFT to measure the adoption of RMB payments by value with China and Hong Kong compared to other currencies.

Among the 101 countries using the RMB for payments, the weight of these payments by value reached 12.9 per cent, giving the currency a nearly 2 per cent increase since October 2014.

L/C implications

Although seven more countries are 'crossing the RMB river' than in October 2014, these new nations are - with the exception of Spain - smaller trade partners for China, including Bolivia, Colombia, Mozambique, Namibia, Kuwait and Georgia.

SWIFT data shows that the RMB's activity share for L/Cs reached the 10 per cent threshold in 2015 whereas in January 2013 its share was less than 7.5 per cent.

That share subsequently fell away to around 9 per cent of activity in the global issuance of L/Cs which makes the RMB the second most used currency for this purpose, but leaves it way behind the US dollar with an 80 per cent share.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.