Since the beginning of this year, the frequency and scale of the use of RMB in China's cross-border transactions have been increasing, showing that the process of its internationalization is accelerating. According to the data of the State Administration of Foreign Exchange, in July this year, the total amount of China's cross-border transactions was 7,288.3 billion yuan, of which 3,657.1 billion yuan was paid in RMB, accounting for 502%, a record high and the first time to exceed half of the milestone.
Behind this achievement is the strong recovery of China's economy and the continuous promotion of opening up to the outside world, as well as the embodiment of the confidence and recognition of China's enterprises and residents in the RMB. The advantages and convenience of RMB in cross-border transactions have provided strong support for China's participation in international economic cooperation and competition.
The proportion of RMB in cross-border transactions includes not only cross-border goods**, but also cross-border direct investment, indirect investment, and other investment. Among them, cross-border direct investment and indirect investment are the main contributors to the proportion of RMB, reaching more than 70% and 50% respectively. This shows that China's foreign investment activities are increasingly settled in RMB, which reduces exchange rate risks and costs, and improves efficiency and returns.
In terms of cross-border goods**, although the proportion of RMB is not more than half, it has also increased significantly. According to the report of the central bank, in the whole year of 2022, among China's cross-border goods**, the amount of RMB settlement increased by 37%, accounting for 19%. In the first seven months of this year, the proportion of RMB settlement amount continued to rise, and is expected to exceed 25%. This reflects the diversification and balance of China's goods, as well as the competitiveness and attractiveness of the RMB in the international market.
The increase in the proportion of RMB in cross-border transactions also means that the status of RMB in the international financial market has been enhanced. At present, RMB is already the world's third largest financing currency, the fifth largest payment currency and the international reserve currency, forming a large-scale offshore RMB market. This provides a solid foundation and broad space for the internationalization of the RMB.
Of course, the internationalization of the renminbi also faces some challenges and difficulties, such as the short-selling operation of international investment banks, the change of interest rate differentials between China and the United States, and the hegemony of the US dollar. These factors will bring certain fluctuations and pressures to the RMB exchange rate, but will not change the long-term trend and reasonable range of the RMB exchange rate. The trend of the RMB exchange rate ultimately depends on the development potential and competitiveness of China's economy, as well as China's status and role in the global economy.
At present, the RMB exchange rate is still at a low level, and the gap between China's GDP and the United States in US dollar terms is still widening. However, with the gradual recovery of the RMB exchange rate and the cyclical nature of the US dollar index, China's economic scale will also grow significantly in US dollar terms. The internationalization of the renminbi is a non-linear process, with peaks and troughs, and we should not pay too much attention to short-term fluctuations, but should see the long-term direction and goals.
The renminbi accounts for more than half of cross-border transactions, an achievement to celebrate and a motivator to keep going. We must adhere to the basic national policy of opening up to the outside world, promote the internationalization of the renminbi, and contribute our strength to China's economic development and international cooperation.