Chinese banks helped customers net sell 51.8 billion USD in September - the highest level since the end of 2020, according to official figures released on October 22. The customer group includes exporters - importers, foreign investment enterprises and financial institutions owning USD assets.
According to Bloomberg, this figure reflects the strong shift towards the yuan - as the currency increases in value and optimism spreads in the context of the US - China trade tensions returning.
Experts say that with a record-breaking sales volume, China is becoming the locomotive in the BRICS' efforts to reduce its dependence on the USD.
Khoon Goh - Head of Asia Research at ANZ Bank - commented: "The surplus in foreign exchange payments shows that capital is flowing back to China, and at the same time reflects the acceleration of exporters in converting USD to yuan".
According to data from the People's Bank of China (PBOC), foreign currency conversion volumes in commodity trade activities have skyrocketed, thanks to strong export momentum in September. This trend partly compensates for capital flows from the domestic stock market, where foreign organizations continue to withdraw from domestic bonds.
Analysts interviewed by Bloomberg predict that if the yuan continues to increase to the 7.00 CNY/USD zone, Chinese exporting enterprises may also convert hundreds of billions of USD into domestic currency in the coming months. Currently, the USD-CNY exchange rate is at 7.13 CNY/USD, the strongest level since November last year.
In early October, shortly after US President Donald Trump threatened to impose tariffs on Chinese goods, the PBOC set the yuan's daily reference rate at its strongest level in a year. Analysts said that this is a clear signal that Beijing wants to raise the position of the domestic currency, while strengthening the confidence of domestic enterprises.
With the PBOC-backed yuan and its neo at a higher level, exporters are more motivated to sell foreign currency to exchange to domestic currency. The export conversion rate could continue to increase for the rest of the year, further boosting the yuans strength, said Khoon Goh.
China's move comes as the BRICS is promoting bilateral trade in domestic currency instead of USD. The sell-off of large amounts of USD by Chinese enterprises is considered the first concrete step to realize this strategy.
