France has emerged as the leading eurozone country for exchanging renminbi payments, following a 249% growth in the value of payments since March last year, research shows.
Excluding Hong Kong and China, France now ranks fourth after the UK, Singapore and Taiwan for renminbi payments, according to figures from Swift, a bank messaging network.
Some 21.4% of the payments made between France and China/Hong Kong were denominated in CNY, the currency code for the offshore renminbi. This compares to 6.5% one year ago.
The majority of renminbi payments (95%) were institutional transfers and the rest customer payments.
Lisa O’Connor, renminbi director at Swift, says the trend signifies France’s drive to become a leading renminbi trading centre for Europe.
“French acceleration in RMB [renminbi] payments reflects increased competition with the UK since the Bank of England announced that it had signed a three-year currency swap agreement with China in March,” she says.
“It will be interesting to see how France’s work towards setting up a currency swap agreement with China progresses, and the impact that this activity within Europe may have on the RMB.”
Esty Dwek, an investment strategist at HSBC Private Bank, says although the CNY market “is still very small compared to other bond markets and compared to the size of the Chinese economy”, currency diversification will remain a priority for many investors.
“The perception that CNY may be a safe haven among currencies may have been further exacerbated by the recent drop in gold prices, which is likely to have hurt investor confidence in the shiny metal as a store of value, leading investors to look for alternatives,” she says.
However, Dwek concedes that the renminbi still makes up only a tiny portion of global foreign exchange reserve assets, and the daily turnover of the currency is barely in the top ten globally.
If the renminbi were fully convertible, Dwek says it would have the third highest turnover among global currencies.
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