LONDON Feb 7 Usage of the Chinese yuan in key
international centres fell 10.5 percent last year, hitting a
29-month low in December 2016, a proprietary index compiled by
Standard Chartered showed on Tuesday.
Earlier in the day, official data showed that Chinese hard
currency reserves had fallen below the key $3 trillion mark for
the first time in almost six years as capital outflows continued
unabated despite a raft of regulations and capital controls.
Standard Chartered, which measures offshore yuan activity
via a special Renminbi Globalisation Index (RGI), said these
measures had also curbed usage of offshore yuan. The
index is based on various gauges of currency use including
cross-border payments and yuan deposits overseas.
It added that "tighter capital controls, lingering
intervention worries and persistent depreciation expectations
have kept genuine CNH users cautious".
The index plunge was most marked in December, with a two
percentage point fall to 1,926 points or 20 percent below peaks
hit in mid-2015, Standard Chartered added, citing a sharp fall
in CNH deposits offshore as Beijing engineered a liquidity
squeeze to force flows back to the mainland.
According to the data, just 11.5 percent of China's goods
trade was settled in yuan in December, a 28 percent decline
compared with the same month in 2015. Overall in 2016,
yuan-settled goods trade declined 36 percent from the previous
Standard Chartered expects the decline in offshore yuan
usage to continue this year as Beijing intensifies efforts to
clamp down on capital outflows.
It highlighted that last January too, Beijing had squeezed
liquidity and noted that offshore use had failed to recover in
the months after that. That trend will carry into 2017, it
China has been keen to promote yuan use overseas, and last
year the unit was being included in the International Monetary
Fund's basket of reserve currencies.
But Standard Chartered said Beijing's priority now was
"January's drop in FX reserves to below $3 trillion further
confirms that the pressure remains for Beijing to prioritise
currency stability and curb capital outflows over promoting
renminbi internationalisation," the bank added.
Onshore, the yuan is controlled by the central bank, trading
within a 2 percent band either side of a reference rate, but it
can move more freely offshore, hence the different exchange
While most offshore yuan trading is in Hong Kong, London and
Singapore are also important centres.
(Reporting by Sujata Rao; Editing by Hugh Lawson)