China's Yuan Payment Rate Rises to 3.6%... Cracks in Dollar Hegemony

China's Yuan Payment Rate at 3.6%
Currency Swap Agreements Signed with 30 Countries
Increasing Yuan Loans to Raise Economic Dependence

This year, the yuan settlement rate in the global market increased to the 3% range, indicating that China's efforts to expand yuan hegemony have borne fruit. China has cracked the dollar hegemony by actively signing currency swap agreements, expanding the yuan's sphere of influence mainly in Arab and Latin American countries.

[Image source=Reuters Yonhap News]

According to major foreign media on the 6th (local time), the yuan settlement rate in the global market reached 3.6% last month, rising above the 3% level. Although it is still lower compared to the dollar (47.25%) and the euro (23.36%), it can be evaluated that the status of the yuan in the international community has increased compared to January, when the settlement rate was only 1.9%.

The proportion of overseas countries using the yuan in trade with China has also increased. The People's Bank of China announced that 30% of the total service and goods transactions between overseas capital and China were settled in yuan.

Actively signing currency swap agreements this year, mainly with countries participating in the Belt and Road Initiative (一帶一路, land and maritime Silk Road), also raised the yuan's influence in the global market. China signed currency swap agreements with 30 Belt and Road participant countries this year and established yuan settlement systems with 17 countries. Brazil agreed in March to use yuan instead of the dollar in trade with China. Saudi Arabia signed a currency swap agreement worth 9 trillion won with China last month.

In particular, Argentina used yuan obtained through a currency swap with China to repay debt. In August, Argentina repaid $1.7 billion of IMF loans due with 12 billion yuan. Struggling to overcome an economic crisis due to a shortage of foreign currency, Argentina is filling its reserves with yuan instead of dollars to stabilize foreign exchange. In January, the two countries activated 35 billion yuan out of a 130 billion yuan currency swap to support Argentina's foreign exchange stabilization policy.

Additionally, China has actively provided yuan loans to overseas countries. In October, the proportion of yuan loans among all overseas loans executed by Chinese banks accounted for 28%. This is a significant increase compared to the 17% yuan loan proportion during the same period last year. In March this year, China also released yuan for trade payment to Saudi Arabia, its largest crude oil importer. Furthermore, in mid-October, the Egyptian government became the first African country to issue yuan-denominated bonds worth $3.5 billion in the Chinese interbank market with China's assistance.

Some argue that China is intentionally increasing yuan dependence by providing yuan loans and signing currency swaps with countries facing economic difficulties. Since the dollar still holds a dominant position in the global market, the use of yuan is limited outside of transactions or debt repayments with China. The more yuan is increased through currency swaps with China, the more trade transactions with China must increase to enhance its usability.

Major foreign media explained, "The yuan has limited use in the market except for purchasing Chinese goods or repaying debts," and added, "In fact, China is inducing yuan settlement and fully providing loans or currency swaps to increase economic dependence on China."

This content was produced with the assistance of AI translation services.