(Yicai Global) April 8 -- As demand for Chinese-made goods rises due to the impact of the Covid-19 pandemic on the world’s manufacturing bases, a growing number of overseas importers of Chinese goods are willing to settle their orders in Chinese yuan, accelerating the internationalization of the redback.

Using the yuan can help foreign companies with a strong complementary trading relationship with China save on financial transaction costs when paying for Chinese goods and services, Zhao Zhongxiu, president of Shandong University of Finance and Economics, told Yicai Global. It also helps hedge Chinese exporters against exchange rate swings to some extent, he added.

2020 was our best year in 20 years of being in business, said Wu Yaping, partner at the Yiwu Longda Car Dealership. As there were less orders, she chose to use trading methods that were in her favor, such as settling all orders in yuan to avoid exchange rate fluctuations.

The manufacturing hub of Zhejiang province, which has been allowing cross-border yuan settlements since 2018, attracted CNY6.4 trillion (USD980 billion) in yuan inflow as of the end of July last year, benefiting more than 47,000 businesses, the People’s Bank of China’s Hangzhou branch said.

While instances of using the yuan as the transaction currency are still very few, there is a clear upward trend, Zhao said. To bypass the dollar is not a problem technically, but domestic supporting measures need to keep up, he added.

Yuan settlement is mainly used in oil and iron ore transactions at present, said Wei Jianguo, vice chairman of the China Center for International Economic Exchanges and former vice minister of commerce. The next step is to expand its use in the trading of coal, potash, fertilizer and other commodities.

More countries will make payments in yuan in the future as they get a better understanding of the competitiveness of China’s hyper-scale market, which will accelerate the internationalization of the yuan and challenge the greenback hegemony, Wei said.

Editor: Kim Taylor