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Yuan Adoption Tracker Update: Q2 2025

Updated: Nov 7

Tracking Renminbi Internationalization Amid Global Economic Realignment


Executive Summary

The second quarter of 2025 presented a more challenging environment for the internationalization of the Chinese renminbi (RMB). After a period of steady gains, the yuan experienced a notable setback in its share of global payments, highlighting the currency's ongoing vulnerability to global economic shifts and competitive pressures. Despite this, underlying trends, such as the growing foreign holdings of yuan-denominated assets, indicate that the currency's international appeal continues to deepen, albeit in a non-linear fashion.


This quarterly update analyzes the key developments from Q2 2025, providing a data-driven assessment of the RMB's progress. The report examines the conflicting signals from SWIFT payment data and foreign asset holdings, and explores the broader economic context that shaped the yuan's performance during this period, despite an absence of developments in national adoption.


Key Takeaways

  • Yuan's Share of Global Payments Declines: The most significant development of the quarter was the decline in the yuan's share of global payments. According to SWIFT, the yuan dropped from 4th to 6th place among global payment currencies in May 2025, with its market share falling to 2.89% from 4.33% in February. This was the yuan's lowest ranking since early 2024.

  • Foreign Holdings of Yuan Loans Reach One-Year High: In a seemingly contradictory trend, foreign institutions' holdings of domestic yuan loans reached a one-year high of 1.15 trillion yuan in June 2025. This suggests that while the yuan's use in transactional payments may have dipped, its appeal as a store of value and an investment asset continues to grow among international institutions.

  • China's Economy Shows Stability Amid Headwinds: China's economy remained broadly stable in the first half of 2025, with Q2 GDP growth at 5.2%. However, the economy continues to face structural challenges, including weak domestic demand and a struggling property sector, which could impact the yuan's international attractiveness.

  • Yuan Appreciates Against Expectations: Contrary to the expectations of many analysts, the yuan appreciated against the US dollar during the first half of 2025. This was driven by a combination of factors, including the yuan's relative undervaluation, low inflation in China, and shifts in global reserve holdings.

  • Alternative Infrastructure Continues to Develop: While there were no major new infrastructure announcements in Q2, the development of the digital yuan cross-border settlement system and the mBridge platform continued in the background, laying the groundwork for future growth.


The second quarter of 2025 served as a good reminder that both alarmism and dismissiveness of yuan internationalization misses the genuine level of underlying complexity. The currency's path to becoming a major global player will not be a straight line either way.


SWIFT Payment Metrics: A Quarterly Setback

The second quarter of 2025 was marked by a notable reversal in the yuan's recent gains in the global payments landscape. After reaching the 4th position in late 2024 and early 2025, the yuan dropped to 6th place in May 2025, with its share of global payments by value falling to 2.89% [1]. This represented a significant 23.07% decrease in RMB payments value compared to April 2025, a drop that was more pronounced than the general 6.81% decrease across all payment currencies during the same period.


This setback underscores the volatility and competitive pressures the yuan faces in its path to internationalization. While the currency has shown periods of rapid growth, it remains susceptible to shifts in global trade and financial flows, as well as to the enduring dominance of the US dollar and other major currencies.


Foreign Holdings of Yuan Loans: A Contradictory Signal

In stark contrast to the negative trend in SWIFT payments, foreign institutional holdings of domestic yuan loans reached a one-year high of 1.15 trillion yuan in June 2025 [2]. This suggests that while the yuan's transactional use may have dipped, its appeal as an investment asset and a store of value for international institutions continues to grow.


This divergence between transactional data and investment data highlights the multifaceted nature of currency internationalization. The growth in foreign holdings of yuan assets indicates a deepening of financial integration and a growing confidence in the long-term prospects of the Chinese economy and its currency. This trend is likely driven by the relatively attractive yields on yuan-denominated assets and the desire of international investors to diversify their portfolios.


Economic Context: Stability Amidst Headwinds

The yuan's performance in the second quarter of 2025 was set against a backdrop of a Chinese economy that showed broad stability but continued to face significant structural headwinds. China's GDP grew by 5.2% in the second quarter, keeping the first half of the year on track to meet the government's growth targets [3]. This stability was supported by a fiscal impulse estimated at 1.6% of GDP for 2025, as the government rolled out stimulus measures to support near-term growth [4].


Despite the stable headline growth, the Chinese economy continues to grapple with challenges, including weak domestic demand and a struggling property sector. These issues could have a dampening effect on the yuan's international appeal, as they raise questions about the long-term sustainability of China's growth model.


In a surprising development, the yuan appreciated against the US dollar during the first half of 2025, defying the expectations of many analysts who had predicted a devaluation [5]. This appreciation was driven by a combination of factors, including the yuan's relative undervaluation, low inflation in China, and shifts in global reserve holdings. The People's Bank of China also appears to have actively resisted pressure for the yuan to appreciate further, suggesting a desire to maintain a stable exchange rate [6].


Country-Level Implications: A Divergent Picture

The second quarter lacked the headline-grabbing bilateral agreements of the previous period, but the underlying macroeconomic shifts created a divergent picture for different groups of countries. The conflicting signals of declining payment volumes and rising investment holdings can be understood by examining how these trends impacted nations based on their economic relationship with China.


Debtor and Developing Nations: A Deepening Financial Link

The most telling trend for developing nations was the continued growth in foreign holdings of yuan-denominated loans, which reached a one-year high of 1.15 trillion yuan in June [2]. This indicates that while transactional use of the yuan may have slowed, its role as a currency for lending and development finance was deepening.


Why it matters: For nations with significant debt to China, the increasing availability of yuan-based financing and the potential for converting dollar-denominated loans into yuan is looking like an increasingly attractive level for debt management.


Commodity Exporters: The Impact of a Stronger Yuan

Contrary to many expectations, the yuan appreciated against the US dollar through the first half of 2025 [5]. For commodity-exporting nations, a stronger yuan is a double-edged sword. On one hand, it increases their purchasing power for Chinese goods and services. On the other hand, for those selling commodities priced in dollars, it makes Chinese imports more expensive, potentially dampening demand.


This dynamic likely contributed to a cautious stance among some commodity exporters, who may have been hesitant to increase their holdings of an appreciating currency for trade settlement. However, for those already moving towards yuan-based commodity contracts, the stronger currency offered better returns for their exports.


Advanced Economies: A Pause in Transactional Adoption

The drop in the yuan's SWIFT ranking from 4th to 6th place likely reflects a slowdown in its use within major financial centers in Europe and North America. This can be attributed to several factors:

  • Economic Uncertainty: Concerns about the structural weaknesses in China's economy, such as the property sector crisis, may have led to a more cautious approach from Western financial institutions.

  • Geopolitical Tensions: Ongoing trade tensions and geopolitical friction can lead to a flight to more established and liquid currencies like the dollar and the euro for international trade settlement.

  • Interest Rate Differentials: Shifting interest rate differentials between China and other major economies can influence the attractiveness of holding yuan for short-term trade financing.


The decline in transactional use in these markets, juxtaposed with the deepening financial links in the developing world, highlights the two-track nature of the yuan's internationalization. The currency's progress is not uniform and is highly dependent on the specific economic and political context of each partner country.


Outlook: Navigating Conflicting Signals

The second quarter of 2025 has provided a complex and somewhat contradictory picture of the yuan's internationalization. The sharp drop in the currency's SWIFT ranking highlights the challenges it faces in breaking into the top tier of global payment currencies, while the continued growth in foreign holdings of yuan assets demonstrates its growing appeal as an investment asset.


This divergence suggests that the yuan's internationalization is proceeding along two different tracks: a slower, more volatile path in the transactional space, and a steadier, more promising path in the investment space. As we look ahead to the third quarter, the key question will be whether the growth in investment holdings can translate into a recovery in transactional use.


The developments of Q2 serve as a reminder that the internationalization of the yuan will not be a linear process. It will be a long and complex journey, with periods of rapid progress interspersed with periods of consolidation and even setbacks. The ability of the Chinese government to navigate its domestic economic challenges while continuing to open up its financial markets will be crucial in determining the yuan's ultimate role in the global monetary system.



References


[2] Global Neighbours. (2025). Cover Story: How the Yuan is Taking Over the Dollar's Role in Global Trade. https://www.globalneighbours.org/cover-story-how-the-yuan-is-taking-over-the-dollars-role-in-global-trade/


[3] ARC Group. (2025). China Economic Update Report, Q2 2025. https://arc-group.com/report/china-economic-update-report-q2-2025/



[5] VanEck. (2025, August 12). The Curiously Unpopular Case for RMB/CNY Appreciation. https://www.vaneck.com/us/en/blogs/emerging-markets-bonds/the-curiously-unpopular-case-for-rmb-cny-appreciation/


[6] Council on Foreign Relations. (2025, July 16). The Case that China is Now Actively Resisting Pressure for Yuan to Appreciate. https://www.cfr.org/blog/case-china-now-actively-resisting-pressure-yuan-appreciate

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