The central banks of Pakistan and China recently signed a memorandum of understanding (MoU) on setting up renminbi (Chinese currency) clearing arrangements in Pakistan to increase the Chinese currency’s usage for cross-border transactions. Although China and Pakistan have renminbi clearing arrangement since 2011, it is not on large scale for trade purposes.
The MoU was signed between the State Bank of Pakistan (SBP) and Peoples Bank of China (PBoC). The MOU was signed by SBP Governor Jameel Ahmad and his counterpart at the PBoC Yi Gang.
The statement of the SBP said:
The establishment of the yuan clearing arrangement in Pakistan will further boost usage of yuan for cross-border transactions among Chinese and Pakistani enterprises and financial institutions.
“It would also promote bilateral trade and investment between the two countries”, the SBP statement added.
The statement of PBoC said:
The arrangements will boost the usage of renminbi for cross-border transactions among Chinese and Pakistani enterprises and financial institutions and further facilitate bilateral trade and investment.
The MoU has been signed during Pakistan’s Prime Minister Shehbaz Sharif’s two-day visit to Beijing. As per reports, the MoU intends to decrease Pakistan’s dependency on US dollars for bilateral transactions and ease the pressure on the country’s external account. After this MoU, Pakistan would be able to raise debt from Chinese markets.
China’s President Xi Jinping said that China will continue to assist Pakistan in restoring stability to its finances. China is involved in multiple mining and infrastructural projects in Pakistan, as part of the $65 billion China-Pakistan Economic Corridor (CPEC), which includes the deep-water Gwadar port project in Baluchistan province.
