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Use of the renminbi in global payments fell last month, raising questions over how closely the currency’s path to internationalisation is tied to expected appreciation in the coming years.

The Chinese currency broke into the top five most used payments currencies in December, according to data from clearing system Swift, overtaking the Canadian and Australian dollars.

However, in February, renminbi use dropped to 1.8 per cent of global payments from 2.2 per cent in December, figures released on Monday showed, nudging it back down to seventh in the rankings.

Swift said the fall was likely due to the seasonal effects of Chinese new year, which fell in February this year. However, other recent indicators suggest a possible slowdown in the pace of renminbi take-up by investors and companies.

Issuance of offshore renminbi bonds — known as “dim sum” bonds — has fallen sharply this year, and is expected by some analysts to record the first annual contraction since the market opened in 2007.

So far this year, $5bn has been raised in the dim sum bond market, according to Dealogic, down from $8.6bn over the same period in 2014.

A recent survey by HSBC found that fewer global companies were expecting to increase their use of renminbi in cross-border business this year than did in a similar survey a year earlier. HSBC also found that only 27 per cent of those not currently using the renminbi are planning to start using it, down from 32 per cent in 2014.

Even Chinese companies are looking elsewhere, choosing to raise new debt offshore in euros as the onset of quantitative easing by the European Central Bank pushes down borrowing costs.

Increasing hesitancy about using the renminbi coincides with a rise in two-way volatility against the US dollar. This month the Chinese currency fell to its lowest level versus the dollar since 2012.

Although small compared with the swings in some emerging market exchange rates, the downward moves in the renminbi over the past year have been large by historical standards.

Expectations of further renminbi depreciation have been building as capital outflows have accelerated and the People’s Bank of China has acted to boost growth by cutting interest rates. On Monday, Chinese equity markets soared to a seven-year high on a growing belief that further economic stimulus measures are imminent.

Beijing has taken a number of steps over the past year to encourage international use of its currency, most notably with the launch of the Shanghai-Hong Kong Stock Connect — a cross-border equity trading link denominated in renminbi.

China has also appointed renminbi clearing banks in a number of international financial centres, agreed new currency swap lines with other central banks and handed out renminbi investment quotas.

Swift notes that while Hong Kong still dominates renminbi business outside mainland China, its share has been falling as renminbi use in other centres — such as London and Singapore — has grown.

This year the International Monetary Fund will debate whether to add the renminbi to its list of currencies used to value its Special Drawing Rights. Analysts are divided on whether the Chinese currency is ready.

Copyright The Financial Times Limited 2017. All rights reserved.
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