US Corporations Dump Dollar for Chinese Renminbi to Buy Imports
The U.S. dollar is being increasingly dropped as the currency for settling international trade. But perhaps the latest trend provides the most startling evidence yet that the dollar is doomed as the world reserve currency.
The Financial Times reported today that U.S. corporations are using the Chinese renminbi to buy imports over three times more than they had the previous year:
China’s renminbi is rapidly displacing the US dollar as a trading currency not only in Asia and Europe but now also in the US home market.
The value of renminbi payments between the US and the rest of the world rose by 327 per cent in April this year from the same month a year ago (see chart) as more US corporations switched to using the Chinese currency to pay for imports from China, according to data from SWIFT, the international currency settlement firm.
First, US importers can slash the cost of imports from China by agreeing to trade in renminbi rather than US dollars, Lodge said. Second, a recent surge in the popularity of a host of renminbi-denominated financial market instruments are making it easier for US corporates both to hedge currency risk and to earn an investment return from the renminbi they hold.
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