Cross-border trade settlements in the Chinese currency are expected to grow by 50 per cent in 2014 to 6 trillion yuan (US$988 billion) in 2014, according to Deutsche Bank.

The bank's expectations are based on the swift adoption of renminbi (RMB) denominated letters of credit (L/Cs) and other trade finance instruments.

Stronger growth

If Deutsche Bank's prediction materialises, this would mean around 20 per cent of China's global trade volume will be RMB-denominated next year.

This compares with an estimated 17 per cent of yuan trade settlements in 2013 according to the bank.

Gaining traction

In the ten months to October 2013, the volume of yuan trade settlements totalled 3.55 trillion yuan, reflecting the traction gained by the Chinese currency in cross border trade in recent years.

RMB-denominated L/Cs are attractive to multinational companies dealing with China and seeking to mitigate exchange risks, reduce transaction costs and speed up payments.

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