There has been remarkable progress in global use of the renminbi (yuan), which is set to continue, according to a central bank report.
"The Chinese currency has taken steady steps on its global march and the yuan's use on the capital account has been liberalized steadily," said a People's Bank of China (PBOC) report.[Special Coverage]
"The growth of cross-border transactions using the yuan and increased international cooperation in the use of yuan have given a boost to the currency's rise as an international currency," the report said.
Trade using the yuan accounted for 1.94 percent of all transactions made through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) in August, the fifth most-traded currency on the platform.
China has been pushing the yuan's global use, as it looks to lower international trade transaction costs, which are mostly settled in U.S. dollars at present.
In a milestone for the yuan's internationalization, the currency joined the IMF Special Drawing Right basket in October last year, making it the fifth currency in the basket, joining the U.S. dollar, euro, Japanese yen and British pound.
Created by the IMF in 1969, the Special Drawing Right is an international reserve asset to supplement the official reserves of members. It can be exchanged among governments for usable currency in times of need.
Following the launch of the Shanghai-Hong Kong stock link in 2014, the Shenzhen-Hong Kong stock connect started trading in December 2016, gradually internationalizing the capital market.
A Bond Connect between the Chinese mainland and Hong Kong began this July, allowing investors from both sides to trade bonds on each other's interbank markets. Foreign institutions increased their holdings of yuan-denominated bonds by a record 82.6 billion yuan (about 12.4 billion U.S. dollars) in August.
The report said efforts were needed to enhance the yuan's role in investment, reserves and financial transactions.
It also emphasized the importance of enhancing risk prevention, with the central bank vowing to step up market supervision.