China's currency Renminbi (RMB), or the yuan, has seen wider acceptance in international usage as the country's resilient economic growth bolstered global demands and opening-up measures facilitated foreign investment.

By the end of 2020, the RMB Internationalization Index (RII) reached 5.02, a sharp increase of 54.2 percent from a year ago, data compiled by the International Monetary Institute of Renminbi University of China showed.

The jump in RII was highly related to the augmentation of RMB as a means of denomination and settlement in international trade, and a remarkable step-up in the performance of RMB in terms of financial transactions.

The trend continues into 2021. The Standard Chartered Renminbi Globalization Index rose to a new high of 2,698 in August this year.

TRADE BOOSTS RMB SETTLEMENT

The world's second-largest economy took the lead to recover from the pandemic-induced slowdowns. As China's imports and exports surged in the past year, so did the global use of RMB expand in trade settlement.

Cross-border use of the RMB, including payments and receipts, soared 44.3 percent year on year to 28.39 trillion yuan (about 4.4 trillion U.S. dollars) in 2020, an all-time high, according to a report on the internationalization of RMB published by the People's Bank of China.

In the first six months of 2021, the use of RMB in cross-border trade grew to 17.57 trillion yuan, accounting for 48.2 percent of the total during the period.

Cross-border RMB settlements closely related to China's real economy, such as current account and direct investment, saw faster growth, according to the report, with RMB usage in raw material trading and the Association of Southeast Asian Nations seeing outstanding growth.

In November, the RMB has maintained its spot as the fifth-largest most active currency for global payments by value, taking up a share of 2.14 percent, increasing by 18.89 percent compared to October 2021, according to the Society for Worldwide Interbank Financial Telecommunication, a global provider of financial messaging services.

The PBOC said a survey showed that around 78.8 percent of domestic and overseas industrial and business companies said they are considering using or elevating the share of RMB in their transactions.

EASED RESTRICTIONS INVITE CAPITAL

The influx of capital into the Chinese market is highly related to the country's efforts in carrying out reforms and widening opening up across the field. The country has joined regional and global trade pacts, shortened negative lists, reduced tariff levels and improved the business environment.

One noteworthy sector is the financial market.

Regulators have boosted two-way opening up by expanding offshore RMB markets, opened the interbank bond market to global financial institutions and sovereign funds, optimized RMB trading systems and institutions, and launched various schemes to facilitate foreign investment.

For example, China last year scrapped quotas on the dollar-denominated qualified foreign institutional investor scheme (QFII) and its yuan-denominated sibling, RQFII, further streamlining the procedures for foreign institutional investors.

RMB exchange rates also enjoy more flexibility and stayed relatively stable compared with other currencies during the pandemic, making it a safe-haven asset for global investors.

A recent jump in foreign investment in Chinese equities and bonds denominated in the currency clearly showed a global preference for RMB products.

By the end of October, bonds in China's interbank market held by overseas institutions totaled 3.85 trillion yuan, central bank data showed.

"Our customers have been investing in onshore Chinese bonds, and afterward, they found that the market was much more different from other emerging economies, as it has more liquidity, depth and width," said Becky Liu, head of China Macro Strategy of the Standard Chartered Bank.

RMB is also set to become a more significant part of the global financial system as more central banks add Chinese currency to their reserve asset.

Chinese yuan reserves held by global central banks expanded for 13 consecutive quarters to reach around 318.99 billion U.S. dollars in the third quarter of the year, maintaining the fifth place with a share of 2.66 percent of the total reserves, according to the International Monetary Fund.