RMB's Payment Share Slightly Drops as Financing Soars: Endogenous Internationalization Accelerates

Slight Dip in RMB’s Global Payment Share Offset by Sharp Rise in Margin Financing Balance: An Endogenous, Asset-Driven Logic Is Reshaping the Foundations of RMB Internationalization

Recent financial market data present an apparently contradictory yet profoundly meaningful pattern: According to SWIFT’s latest figures, the RMB’s share of global payments stood at 2.75% in May 2024—down 0.08 percentage points month-on-month. Meanwhile, margin financing and securities lending balances across China’s A-share markets surged by RMB 28 billion in a single day—the highest daily increase this year—with semiconductor, rare-earth, and AI-chip stocks emerging as the primary conduits for leveraged capital inflows. Cambricon soared over 15% intraday, breaching RMB 1,500 per share and setting a new all-time high; the ChiNext Index rose more than 2% in one session—again hitting a record high; and the rare-earth sector led market gains, with export volumes up 36.6% year-on-year in May alone. These are not isolated events but synchronized manifestations of a single, coherent logic—one signaling a quiet yet profound paradigm shift in RMB internationalization: from an “extensive expansion” model anchored in cross-border trade settlement and offshore clearing networks, toward an “endogenous, asset-driven” phase grounded in the depth of domestic capital markets, industrial technological moats, and sovereign asset pricing power.

The Minor Fluctuation in Payment Share Reflects Short-Term Structural Adjustment—Not a Long-Term Reversal

The slight dip in SWIFT’s RMB payment share must be interpreted cautiously within the broader context of ongoing global monetary realignment. In the first half of 2024, the U.S. dollar’s payment share rebounded temporarily amid persistent market expectations of elevated Fed interest rates, while the euro faced headwinds from geopolitical tensions—prompting some energy and commodities transactions previously settled in RMB to temporarily switch to alternative currencies, thereby generating short-term statistical noise. Notably, the RMB’s actual settlement penetration within the RCEP region continues to rise steadily: Cross-border RMB receipts and payments between China and ASEAN countries grew 22.3% year-on-year in Q1 2024—far outpacing the overall growth rate. More importantly, payment functionality is only a surface-level indicator of currency internationalization. Its stability remains highly susceptible to external policy shifts and market sentiment, offering limited insight into a currency’s deeper capabilities as a store of value or investment medium. Thus, marginal fluctuations in payment share represent precisely the critical window for testing whether the RMB possesses genuine, “hard-core” endogenous appeal.

Surging Margin Financing Balances Reveal Domestic Capital’s Proactive Allocation Logic

In stark contrast to the muted volatility in external payment data, the explosive growth in A-share margin financing balances carries far richer behavioral significance. A single-day net inflow of RMB 28 billion was not driven by retail investor sentiment, but rather reflects precise, professional leveraged capital positioning aligned with structural industrial trends:

• Domestic substitution in semiconductor equipment is accelerating rapidly, with Yangtze Memory Technologies (YMTC) and CXMT ramping up capacity faster than expected;
• Rare earths—dubbed the “vitamins of industry”—are undergoing continuous strategic revaluation as indispensable enablers of AI compute infrastructure and next-generation EV motor upgrades; cumulative exports from January to May rose 14.9% year-on-year, underscoring their irreplaceable role in global supply chains;
• Valuations of AI-chip firms like Cambricon have surged, reflecting market recognition of China’s localized technological breakthroughs in large-model inference chips.

At its core, this capital flow represents rational, domestically driven allocation decisions—grounded in verifiable industrial progress, the pace of technological iteration, and clear paths to earnings realization. It relies neither on policy subsidies nor exchange-rate arbitrage, but stems instead from deep-seated confidence in the intrinsic growth potential of RMB-denominated assets. Margin financing balances have thus become a leading indicator of the RMB’s “asset anchoring power.”

Endogenous Logic Is Driving a Structural Transformation in Cross-Border Capital Flows

This shift is profoundly reshaping northbound fund behavior and the strategic frameworks of QFII/RQFII investors. Over the past three years, northbound funds have often been viewed as the “barometer” of A-share markets—but their volatility has intensified markedly: In April 2024 alone, they recorded net outflows exceeding RMB 40 billion, only to reverse into net inflows in May. The root cause lies in divergent analytical lenses: Traditional foreign investors remain predominantly focused on macro variables—such as the U.S.-China interest-rate differential and GDP growth—and index-inclusion effects, while lagging in responsiveness to micro-fundamental drivers—including technology-generation gaps across specific industrial subsectors, inflection points in domestic substitution rates, and the thickness of patent-based technological barriers. By contrast, domestic leveraged capital—benefiting from proximity to information sources and deep industry tracking—has already completed value re-rating across critical links such as semiconductor materials, photoresists, and high-performance neodymium-iron-boron magnets. This implies that the future anchor point for A-share valuation will increasingly reflect domestically driven industrial pricing power—not passive alignment with MSCI weight adjustments or shifts in foreign investor risk appetite. QFII institutions clinging to top-down, macro-driven allocation habits risk persistently missing core growth themes.

Deepening Capital Markets Provide the Institutional Foundation for Endogenous Growth

The strengthening of endogenous logic is no accident—it is the inevitable outcome of institutional evolution: the registration-based IPO reform, implementation of the Shanghai and Shenzhen stock exchanges’ “Category V” listing standards (for unprofitable tech firms), enhanced dividend supervision, and strategic expansion of benchmark indices such as the CSI A500. In 2024, the first cohort of AI-chip companies listed under the dual-criteria standard (“R&D investment + patented inventions”) has maintained R&D expenditure ratios consistently above 35% post-listing—well exceeding the global industry average. Meanwhile, the exchanges’ accommodating review policies toward pre-profit biotech and high-end equipment firms have enabled a wave of “hard-tech” enterprises to secure equity financing precisely during their technology-validation phase. This virtuous cycle—linking technology, capital, and industry—is transforming China’s A-share market from one historically dominated by cyclical stocks into a globally scarce platform for commercializing cutting-edge technologies. When overseas investors recognize that holding shares in SMIC, NAURA, or Shenghe Resources effectively means indirect participation in China’s global competition in semiconductor manufacturing, advanced packaging, and rare-earth permanent magnets, RMB-denominated assets undergo a qualitative metamorphosis—from mere “currency symbols” to “certificates of technological equity.”

Conclusion: The Next Phase of Internationalization Is a Contest for Industrial Pricing Power

The first phase of RMB internationalization competed on infrastructure coverage and the speed of policy liberalization. The decisive battleground of the second phase is whether global capital will willingly hold China’s most technologically defensible assets priced in RMB. Short-term fluctuations in payment share will inevitably be smoothed over time; the endogenous allocation momentum reflected in margin financing balances, however, serves as the true “ballast” capable of navigating economic cycles. When Cambricon’s stock price curve resonates in lockstep with rare-earth export data—and when the ChiNext Index repeatedly shatters prior market expectations—we witness not merely another rally, but the emergence of a new paradigm for currency ascendance: one that no longer seeks external validation, but instead forges irreplaceable value from within. This may well be the essential “coming-of-age ceremony” the RMB must complete before it can credibly claim status as a major global reserve currency.