Chinese Yuan Expands Reach, Overtaking Yen as Third-Most Used Currency in Global Trade

The Chinese yuan overtook the Japanese yen to rank third in the international trade settlement system according to the latest SWIFT data, as its share in global payments rose to 4.8%, narrowing the gap with the British pound, which ranks second.

The expansion of China's bilateral currency swap network with more than 40 countries contributed to accelerating the adoption of the yuan in trade settlements, particularly in the oil and raw materials sectors. Reports indicated that more than 25% of Gulf oil exports to China are now settled in the Chinese currency, a striking increase compared to less than 10% three years ago.

In contrast, the dollar and euro retain their overwhelming dominance over global reserves and financial market settlements, with the dollar still accounting for about 58% of allocated global reserves. A number of economists believe that the yuan's rise in trade does not necessarily translate into a comparable reserve status in the near term.

However, the general trend toward diversifying reserve currencies is gaining momentum, with some analysts noting that the yuan's journey toward full reserve status has become a matter of time, not possibility.

What do these terms mean?

SWIFT System: A global banking network connecting thousands of banks and facilitating international money transfers—most global payments pass through it, making its data a key benchmark for measuring currency adoption.

Bilateral Settlements in Yuan: Agreements between two countries to exchange goods and pay for them directly in yuan without needing the dollar as an intermediary—such as a country purchasing oil from China and paying for it in yuan instead of dollars.

Global Reserve Currency: The currency held by central banks as a store of value and solvency guarantee—the dollar has dominated it for decades, and the yuan seeks to gradually take a share of it.