BANGKOK: The increased popularity of the Chinese yuan among Asean members does not mean it is anywhere close to becoming a major petrocurrency, energy analysts and economists said.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) said Singapore handled around 22 percent of its global payments in yuan last year, excluding those international payments handled by Hong Kong.
This is a large increase in the use of the yuan in the Asean region.
But Patipan Sukorndhaman, chief operating officer for downstream petrochemicals of PTT Global Chemical (PTTGC), Thailand’s largest petrochemical producer, said it would take more than five years for the yuan to become one of the major currencies being traded globally.
He said the yuan would continue to be used in Asean members situated close to China, including Vietnam, Cambodia, Myanmar and Laos.
Some analysts said the Chinese government may have used the yuan to pay for imported commodities to foreign sellers. But even China does not trade widely in the yuan at this stage.
Patipan, whose company is a major seller of polymers to China’s mainland and also a buyer of crude oil from the Middle East, said there are no signs the yuan is becoming a currency of trade.
“It depends on the sellers of crude oil and the sellers of polymers, whether they would agree to using the yuan as a currency of trade,” he added.
Patipan stressed the fact that the yuan is fully controlled by the Chinese central government is another factor preventing it from becoming a top global currency, as the government can intervene at any time, making it risky to use in trade.
In contrast, the US dollar is fully floated and dependent on the global capital markets.
Patipan said it could still take years for China to start using the yuan in bilateral trade.
Polymers exported to China accounted for 20 percent of PTTGC’s total revenue last year despite the collapse of global oil prices, as demand for polymers in Asia, especially olefins and aromatics, still continues to increase.
He said polymers constitute a feedstock for everyday products, which guarantees high growth every year.
Praipol Koomsap, a former deputy energy minister and a prominent economist at Thammasat University, said it would take more than 10 years for the yuan to reach the stage of a major currency for trade.
He reiterated the major reason is that the yuan does not move in line with market forces such as other major currencies like the US dollar, the euro and the yen.
Noting that the Chinese government’s control of the currency was preventing it from being used more widely, Praipol said China may start providing loans to other countries in yuan as a means of boosting its popularity. TNS