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Will China’s Belt and Road Initiative Facilitate Internationalization of the Yuan?

By Mike Faden

China’s huge Belt and Road Initiative is expected to funnel potentially trillions of dollars of investment, over a decade or more, into trade-related infrastructure and other projects spread across at least 65 countries. Although several projects have faced challenges, $81 billion in investment was announced in Q2 2018 alone, according to one analysis.1

Experts say that although Belt and Road has benefited mainly Chinese companies, it has also generated business for U.S. and European firms.2,3 Experts also expect the initiative to help drive one of China’s long-term goals: the internationalization of its currency, the yuan.4


Belt and Road Background: An Infrastructure Initiative


The Belt and Road Initiative directs investment into trade-related infrastructure such as ports, railways, roads, and pipelines. Its goals include opening East-West trade routes, generating business for Chinese companies, and expanding China’s strategic influence, according to The Wall Street Journal.5


The initiative was conceived in the spirit of the ancient Silk Road East-West trading routes. “Belt” and “Road” refer to two sets of East-West trade corridors targeted for investment. One is the Silk Road Economic Belt, which consists of overland trade routes spanning multiple countries in Europe and Asia. The other is the 21st Century Maritime Silk Road, which, despite its name, is an ocean shipping route.6


Since the initiative was first publicly discussed in 2013, it has expanded to involve at least 65 countries – 26 of them in Asia, the rest in Europe, the Middle East, and North Africa. China has invested more than $900 billion in projects to date, and experts estimate that it will invest an additional $600 billion to $800 billion over the next five years.7,8 Merchandise trade along the Belt and Road reportedly grew more than 17 percent in Q2 2018 compared with the year-earlier quarter, to $319 billion.9


However, the initiative has also faced challenges. Several major projects recently have been delayed, suspended, or scaled back by countries concerned about the cost and the associated debt.10,11


China’s state-owned enterprises have been the biggest beneficiaries of Belt and Road projects, according to Deloitte.12 Also benefiting are Western companies whose technology, reputation, and/or local knowledge are seen as key to project success, according to The Economist.13 For example, one U.S.-based multinational said it won $2.3 billion in equipment orders in 2016 related to Belt and Road, and that it expected to continue generating double-digit revenue growth related to the initiative. Among other Western companies winning Belt and Road business are manufacturing, engineering, logistics, and shipping concerns.14 Belt and Road also offers opportunities for small and midsize Western businesses that partner with larger firms and are prepared to navigate the regulatory hurdles of these international projects, experts say.15


Belt and Road — And Yuan Internationalization


The Belt and Road Initiative may also help drive China’s longstanding efforts to “internationalize” its currency, the yuan, by increasing the currency’s use in cross-border transactions. Among the benefits: Broader adoption of the currency can facilitate international trade by Chinese state-owned companies and mitigate the country’s exposure to currency risks, experts say.16


China has taken several steps in recent years to increase international use of the yuan. These include its central bank signing bilateral swap agreements with other central banks, which help make the currency available to other countries.17 In a recognition of the yuan’s emergence as an international currency, the International Monetary Fund in 2016 added it to the International Monetary Fund’s elite Special Drawing Right (SDR) basket of currencies. China’s central bank also recently enhanced its international payments clearing system to enable payments in yuan during business hours across all continents.18


Despite those efforts, the yuan still accounts for only a small fraction of the world’s cross-border payments, according to data from global financial-messaging provider SWIFT, which handles most cross-border bank payments. In July 2018, the yuan ranked eighth among currencies used for SWIFT-based international payments, accounting for only 1.24 percent of payment value (the SWIFT data excludes payments within the Eurozone). That percentage was actually lower than the 1.38 percent share two years earlier. In comparison, the U.S. dollar accounted for 42.63 percent of international payments by value in July 2018, down from 44.91 percent two years earlier.19


The Belt and Road Initiative is expected to increase use of the yuan as companies employ the currency in cross-border transactions. According to a SWIFT executive quoted by The Global Treasurer, more companies, particularly China-based ones, are invoicing customers in yuan and requiring buyers to pay in yuan.20 In 2016 the yuan was used for trade settlement in 13.9 percent of cross-border transactions between China and Belt and Road countries, according to Standard Chartered Bank.21 China is promoting increased yuan usage for cross-border trade under the initiative, the bank says.22 In a survey of Chinese and foreign businesses and financial institutions, undertaken by an Asian financial publication and a Chinese bank, 72 percent of respondents named Belt and Road as the biggest factor in yuan internationalization.23



China’s Belt and Road Initiative continues to funnel investment into trade-related infrastructure across many countries, though several projects have recently faced challenges. Although Chinese firms handle most Belt and Road projects, the initiative has also generated business for Western firms. Experts say the initiative may help to drive the internationalization of the yuan.

Mike Faden - The Author

The Author

Mike Faden

Mike Faden has covered business and technology issues for more than 30 years as a writer, consultant and analyst for media brands, market-research firms, startups and established corporations. Mike also is a principal at Content Marketing Partners.


1. Belt & Road Initiative (BRI): third-quarter 2018 update, Swiss Re Institute;
2. “Embracing the BRI ecosystem in 2018, Deloitte;
3. Western firms are coining it along China’s One Belt, One Road,” The Economist;
4. “How will the OBOR initiative impact treasurers operating in Asia? Part 1: the internationalization of the RMB,” The Global Treasurer;
5. “China’s Global Building Spree Runs Into Trouble in Pakistan,” The Wall Street Journal;
6. Belt & Road Initiative (BRI): third-quarter 2018 update, Swiss Re Institute;
7. “Western firms are coining it along China’s One Belt, One Road,” The Economist;
8. Belt & Road Initiative (BRI): third-quarter 2018 update, Swiss Re Institute;
9. “Belt and Road Initiative Quarterly: Q3 2018,” The Economist Intelligence Unit;
10. Ibid.
11. “China’s Global Building Spree Runs Into Trouble in Pakistan,” The Wall Street Journal;
12. “Embracing the BRI ecosystem in 2018, Deloitte;
13. “Western firms are coining it along China’s One Belt, One Road,” The Economist;
14. Ibid.
15. Finding Opportunities in China’s Digital Belt and Road, East West Bank;
16. “Rise of the Redback: Internationalizing the Chinese Renminbi,” The Diplomat;
17. Ibid.
18. “The Internationalisation of the Renminbi,” HSBC;
19. RMB Tracker August 2018, SWIFT;
20. “How will the OBOR initiative impact treasurers operating in Asia? Part 1: the internationalization of the RMB,” The Global Treasurer;
21. China – Belt and Road is taking shape, Standard Chartered Bank;
22. Ibid.
23. “Belt and Road Initiative Driving Internationalisation of Renminbi: CCB Report,” China Banking News;

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