巴基斯坦网民评论:用人民币结算巴中贸易意味着什么 [巴基斯坦媒体]

用人民币结算巴中贸易意味着什么 [巴基斯坦媒体]

What it means to use yuan in trade with China



What it means to use yuan in trade withChina


巴基斯坦网民评论:用人民币结算巴中贸易意味着什么 [巴基斯坦媒体]

IT has finally been officially confirmedthat Pakistan is considering using the Chinese currency for bilateral trade.


At a weekly media briefing on Dec 21, Foreign Office spokesman Dr MuhammadFaisal said Pakistan and China “will actively use bilateral currencies for thesettlement of bilateral trade and investment (transactions) under the relevantarrangements”.


In response to a supplementary question, he said, “The two countries aim topromote monetary cooperation between the central banks, implement existingcurrency-swap arrangements, research to expand the amount of currency andexplore to enrich the use and scope of bilateral currency swap [and] assign theforeign currency to domestic banks through credit-based bids to support thefinancing for projects along the CPEC [China-Pakistan Economic Corridor].”


This means Pakistani and Chinese banks will, in the course of time, be able toopen import letters of credit in rupees and yuan (also known as renminbi, orRMB). Moreover, Pakistan will be able to pay for imports from China in yuanrather than in dollars, and Chinese companies investing in CPEC projects willbring in yuan-denominated funds here and remit back their profits and dividendsalso in yuan instead of dollars or other foreign currencies.


Even non-Chinese companies participating in the CPEC will be able to do thatvia their Chinese principal companies, senior bankers explain.


“The dollar may remain the most dominatingmedium of exchange in the foreseeable future. But if Islamabad and Beijing canmaterialise their dream (to settle bilateral trade and investment transactionsin rupees and yuan), we can reduce our dependence on the greenback graduallyover a long time,” says the head of a large local bank.


There is a growing trend towards promoting the use of local currencies tosettle transactions between two or more countries, as countries seem eager toreduce their overdependence on the US dollar.


As recently as on Dec 11, the central banks of Indonesia, Malaysia and Thailandintroduced a framework to boost direct settlement of transactions in theirlocal currencies.


And this makes more sense in the case ofPakistan and China under the CPEC.


Emboldened by its growing global economic clout and out of the necessity tomake the yuan a stronger international medium of exchange, China launched apilot project back in July 2009 to use yuan for cross-border settlements.


The scheme was then developed into a full-fledged framework the very next year,and now hundreds of thousands of Chinese companies transact businesses in yuanwith their partners in Hong Kong and some countries of the Association ofSoutheast Asian Nations.


Besides, after the yuan attained the status of a global reserve currency — thethird one after the US dollar and the euro — on Nov 30, 2016, China speeded upefforts for greater use of its own currency for settling transactions withother nations.


For Pakistan, the rupee-yuan settlement of trade with China is importantbecause “it would reduce our needs for US dollars to a significant extent asour imports from China are in excess of $10bn”, explains a central banker.


Initially, even if 25pc of our imports from China are to be financed in yuan,our dollar requirements would decline by $2.5bn within a year.


But, of course, there’s many a slip ‘twixt cup and lip. “The Chinese bankingsystem is used to handling transactions in yuan and other regional currencies(of the countries with which direct settlement of transactions are going on),but we are not,” a treasurer of a local bank says.


The State Bank of Pakistan (SBP) may come up with a framework for this purposein some weeks or hardly a few months, but for banks to get used to the newsystem will be a challenge, he says. “An even bigger challenge for bankers willbe to explain it to businessmen how the rupee-yuan settlement of transactionswould work and how their businesses would benefit from it.”


Bankers recall that there was no big response when the SBP invited bids in 2013for buying yuan by local banks under a bilateral currency-swap arrangement,which was initially signed in December 2011.


That swap was worth Rs140bn and 10bn yuan. Many bank treasurers don’t exactlyremember any activity undertaken so far under this currency-swap framework.


“But as we are entering 2018, things have changed a lot. The country isstruggling with its external account imbalance and, thanks to CPEC, investmentand trade activity is growing rapidly,” a local bank treasurer says. “So,enlarging the scope of the currency swap and utilising it for settling tradeand investment transactions between Pakistan and China can really help inkeeping external-sector problems in check.”


Now, as we badly need yuan to foot the growing Chinese import bill so thatgrowth in imports and other foreign-currency obligations does not create anunmanageable need for US dollars, only enlarging the amount of rupee-yuan swapswill not be enough.


“What is perhaps more necessary is to sensitise banks and businesses about itand make sure that when the yuan is auctioned in the interbank market for swapagainst the rupee, banks participate in a big way and they actually do this onthe back of corporate-driven demand,” a forex dealer at a local bank says.


As a next step, promoting the clearance and settlement of claims of financialinstitutions through a cross-border interbank payment system is also a must.And Pakistan and China have already agreed upon doing this, according to theForeign Office spokesman.


Once concrete developments are made in this regard, the free flow of capitaland cross-border transfer of legitimate funds between the two countries wouldbecome easier, reducing the need for more complex centralised internationalclearing system in New York and London.




a day ago

The fundamental question remains unansweredthat how will we earn yuan funds to repay all the yuan denominated obligationsincluding the huge trade deficit with China. Our exports to China are hardlyUSD 2 billion against the imports of USD 10 billion from China. If we switch toRMB settlement, there will be a huge funding gap of equivalent to USD 8billion, not to mention obligations under repayments of loans and dividends. IfChina sets up a system to provide yuan liquidity, again a very big question isabout its cost? Will it be lower than the funding cost for US Dollars. At themoment., the answer is a big NO.



a day ago

The Pakistan Rupee should be abolished andChinese Yaun should be made the official currency of Pakistan.


Mrityunjay Tripathi

a day ago

Somebody explain what is the differencebetween depending on yuan and depending on dollar for bilateral trade. Howthese two dependencies are different?



a day ago

....Besides, after the yuan attained thestatus of a global reserve currency — the third one after the US dollar and theeuro — on Nov 30, 2016....

Complete rubbish from this 'expert' author.Japanese Yen and British pound is ready a reserve currency, the chinese yuan isthe 5th.



Imtiaz Ali Khan

a day ago

@IndianDude British Pound is gettingpounded just look at the chart. Yes Japanese Yen is good currency but Japandebt problem is like no other place on the planet 200%+ Debt is a more thanjust a problem, when the Largest Japanese bank single biggest investor is Chinait show the whole picture. RMB is a good currency and they sure are better thanINR or PKR both are far from world class currency.

IndoPak Blood Brothers 4 Life!




a day ago

@Imtiaz Ali Khan just wait for BREXIT andthen Pound will soar again.

@Imtiaz Ali Khan,只要等英国脱欧了,英镑就会再次飙升。

Udayan Mitra

a day ago

Another Chinese rip off scene; USD interestrates are lower than Yuan interest rates.



a day ago

This article does not state explicitlywhere PKR would be used. If yuan becomes the largely denominated currency forboth borrowings and trades, than demand of yuan will rise and demand of PKRwill fall. Simple economics dictate that if the demand of a currency falls, itwill depreciate. And right now Pakistan is already reeling with inflation dueto depreciation of PKR. Please negotiate better terms with the Chinese for moruse of PKR.



a day ago

Next Finance Minister will be appointed byChina?



a day ago

Yuan is not even a fully convertiblecurrency and so it's a compelete sell out to Pakistan by Chinese demands.

Today Yuan was accepted tomorrow Chinesewill insist on flying their flag on Gwadar or using Mandarin on all CPEC forms,will Pakistan accept that too ?



Ashraf The Great

a day ago

@Mohajir Not a bad idea. I would go as faras suggesting that Pakistan abolish Finance minister post and just make it an extensionof the Chinese Finance ministry reporting directly to China. This would cutcosts and the need for protocol for yet another minister.



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本来就是啊 我们又不是跟你霉底交易 为何要用美元结算 真是多此一举 。。。。老鬼子就是仗着美元坑全世界。。。。回复巴基斯坦网民评论:用人民币结算巴中贸易意味着什么 [巴基斯坦媒体]