On the Question of International Currency, Internationalization of the Yuan, and Settlements in National Currencies

ABSTRACT

The subject of this article is currencies for international settlements. The world has seen the emergence of demand for alternatives to the dollar and euro. However, minimal transaction cost remains the main property of a vehicle currency, and China’s ambition to internationalize the yuan is reevaluated in this context. Moreover, yuan settlements primarily handle China’s payments for imports in its national currency. Russia is one of the countries for which the currency is underutilized in its own foreign trade payments. The risks emerging from geopolitical conflicts and Russia’s integrating role in the Eurasian region will facilitate an increase in ruble settlements. It is in the national interest to create a SWIFT-independent system of internal interbank transfers in foreign currencies and to finish the transition to cross-border settlements in rubles within the Eurasian Economic Union in particular.

KEYWORDS:

• cross-border payments
• international settlements
• internationalization
• national currencies
• vehicle currency
• yuan

This article is the republished version of:

On the Question of International Currency, Internationalization of the Yuan, and Settlements in National Currencies

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

^1. With a meaning equivalent to that of the term “vehicle currency” found in the English-language economic literature listed as sources.

^2. Author’s assessment based on data from the Bank for International Settlements.

^3. SDR—special drawing rights: an artificial reserve and payment resource used for settlements between the International Monetary Fund and its members.

^4. China Foreign Exchange Trading System.

^5. Data from the Statista portal (available at https://www.statista.com/statistics/450302/cny-acceptance-for-cross-border-trade-by-region).