Asian economies turn to yuan

A "renminbi bloc" has been formed in East Asia, as nations in the region abandon the US dollar and peg their currency to the Chinese yuan — a major signal of China's successful bid to internationalize its currency, a research report has said.

The Peterson Institute for International Economics, or PIIE, said in its latest research that China has moved closer to its long-term goal for the renminbi to become a global reserve currency.

Since the global financial crisis, the report said, more and more nations, especially emerging economies, see the yuan as the main reference currency when setting their exchange rate.

And now seven out of 10 economies in the region — including South Korea, Indonesia, Malaysia, Singapore and Thailand — track the renminbi more closely than they do the US dollar. Only three economies in the group — Hong Kong, Vietnam, and Mongolia — still have currencies following the dollar more closely than the renminbi, said the report, posted on the institute's website.

The South Korean won, for example, has appreciated in sync with the renminbi against the dollar since mid-2010.

China has long vowed to raise its currency's global sway, along with the rise of its economy, which became the world's second-biggest last year.

The goal has seen significant development in recent years as the country promotes renminbi-denominated cross-border trade and gradually loosens control over its capital accounts.

As a result, Hong Kong has quickly risen to be the world's biggest offshore renminbi trading center, with about 600 billion yuan ($95 billion) in deposits.

According to the latest report by the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, renminbi-denominated trade accounted for 10 percent of China's total foreign trade in July. The figure was zero just two years ago.

From July 1 to Aug 31, global payments in the renminbi rose 15.6 percent, according to SWIFT, as payments in other currencies fell 0.9 percent on average.

The renminbi had a market share of 0.53 percent in August and has overtaken the Danish krone to become the 14th-highest global payment currency, the member-owned cooperative said.

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