France leads eurozone in Chinese renminbi payments

France holds the leading position among eurozone members exchanging renminbi payments, seeing a 249% growth in payments value over the past year.

According to messaging provider Swift, France is now ranked fourth in the world, outside China, for renminbi payments value, behind the UK, Singapore and Taiwan. More than 20% of the payments made between France and China were denominated in yuan in March, compared with 6.5% a year ago.

“This development signifies France’s drive to become a leading renminbi trading centre for Europe. It will be interesting to see how France’s work towards setting up a currency swap agreement with China progresses, and the impact this activity within Europe may have on the renminbi,” says Lisa O’Connor, renminbi director at Swift.

The French acceleration in renminbi payments reflects Paris's intentions to rival London as a trading hub for the currency. Last week, Bank of France governor Christian Noyer was reported in China Daily saying the central bank hopes to boost French market confidence in the currency by working with eurozone members to build a framework to guarantee yuan liquidity.

"The Bank of France has been working on ways to develop a renminbi liquidity safety net in the eurozone, with due consideration of a supporting currency swap agreement with the People's Bank of China (PBoC)," he said.

The news came shortly after an announcement from Bank of England governor Mervyn King and PBoC governor Zhou Xiaochuan in February that the two central banks would work towards an arrangement to "finance trade and direct investment" between the UK and China, and support domestic financial stability if necessary.

"The fact London has this arrangement means it is in Paris’s interests to do something similar to compete. There is a significant amount of renminbi deposits in Paris, and a substantial amount of the trade between France and China is settled in renminbi, so one natural way to develop the relationship is by having a swap line – it’s a natural process," says Mitul Kotecha, global head of FX strategy and head of global markets research Asia at Crédit Agricole in Hong Kong.