Agreement between Pakistan and China will promote the Chinese currency Yuan in bilateral trade
The central banks of Pakistan and China have signed an agreement (MoU) to establish a Yuan Clearing System in Pakistan to increase the use of Chinese currency for cross-border transactions.
The central banks of Pakistan and China signed an agreement (MoU) to establish a Yuan Clearing System in Pakistan to increase the use of Chinese currency for cross-border transactions. Pakistani media reported that the MoU was signed by State Bank of Pakistan (SBP) Governor Jameel Ahmed and his counterpart in the People's Bank of China Yi Gang.
"The establishment of a yuan clearing system in Pakistan will further encourage the use of the yuan for cross-border transactions between Chinese and Pakistani enterprises and financial institutions," the SBP said. The central bank said it would also boost bilateral trade and investment between the two countries. The MoU to this effect was signed during the two-day visit of Prime Minister Shahbaz Sharif to Beijing.
Pakistani media, quoting analysts, said the arrangement would reduce Pakistan's dependence on the US dollar for bilateral transactions. According to IANS news, Mustafa Mustansir, head of research, at Taurus Securities, said, "I think it is a good move and beneficial for trade and investment. It will also reduce the dependence on the US dollar for bilateral transactions." Fahad Rauf, Head of Research at Ismail Iqbal Securities, saw the agreement as a positive development, saying that China is a major trading partner of Pakistan. He said that this will further improve bilateral relations.
Pakistani media quoted Rauf as saying, "Once this system is fully implemented, there will be less dependence on the dollar, which will reduce the burden on our external account." He is of the view that this will also increase Chinese investment in the markets of Pakistan. This will also enable Pakistan to raise debt from the Chinese markets, he said. According to media reports, Chinese President Xi Jinping said that his country will continue to help to restore financial stability in Pakistan.
Beijing has been involved in mining and infrastructure projects in Pakistan as part of the $65 billion China-Pakistan Economic Corridor.