New Delhi: The central bank of Pakistan on Tuesday gave its green signal to using the Chinese currency, Yuan, for bilateral trade with China. The decision to cozy up to Beijing comes just a day after US President Donald Trump vowed to stop all aid to Islamabad.
Adoption of the Yuan would mean that Pakistan and China would be able to replace the US dollar for transactions in China Pakistan Economic Corridor (CPEC) projects.
Pakistan would now be able to pay for imports from China in Yuan and Chinese firms investing in CPEC projects in Pakistan would bring in funds and remit back their profits also in Yuan.
In a press release, the State Bank of Pakistan stated that “Chinese Yuan (CNY) is an approved foreign currency for denominating foreign currency transactions in Pakistan.”
“SBP has already put in place the required regulatory framework which facilitates use of CNY in trade and investment transactions such as opening of L/Cs and availing financing facilities in CNY. In terms of regulations in Pakistan, CNY is at par with other international currencies such as USD, Euro and JPY, etc,” it said.
This move is another indicator of the growing bonhomie between the two countries, which call each other all-weather allies. Bilateral trade between the two countries stood at around $14 billion in 2015-2016. Officials anticipate the trade volume to increase significantly under CPEC cooperation.
Beijing has committed to investing around $60 billion in the country by 2030 under a long-term plan of development cooperation with Islamabad. The CPEC is a flagship project of China's Belt and Road Initiative.
“It may be mentioned here that after signing Currency Swap Agreement (CSA) with People’s Bank of China (PBoC), SBP had taken a series of steps to promote use of CNY in Pakistan for bilateral trade and investment with China. SBP allowed banks to accept CNY deposits and give CNY Trade loans," Pakistan’s central bank said in its release.
"Considering the recent local and global economic developments, particularly with the growing size of trade and investment with China under CPEC, SBP foresees that CNY denominated trade with China will increase significantly, going forward; and will yield long term benefits for both the countries," the State Bank of Pakistan release said.
The move may have come just a day after Trump’s stinging tweet on ‘lies and deceit’, but had been in the offing since at least mid-December. Pakistan’s interior minister, Ahsan Iqbal, who oversees CPEC implementation, had revealed on December 19 that China was seeking bilateral trade in its own currency.
When asked if the Chinese currency could be allowed for use in Pakistan, the minister said the Pakistani rupee would continue to be used domestically.