Move would help both countries get rid of US dollar in bilateral trade, including for China-Pakistan Economic Corridor
By Islamuddin Sajid
Pakistan on Monday announced an agreement with China to use Chinese currency for bilateral trade to end the burden of relying on U.S. dollars.
“China and Pakistan agreed to start trading in the yuan instead of the dollar,” Fawad Chaudhry, minister of information, told reporters in Islamabad.
This agreement, reached during the Pakistani premier’s current visit to China, would help Pakistan get rid of the dollar burden in $15 billion of bilateral trade, he added.
Imran Khan’s four-day official visit to China is ending Monday.
The move to Chinese currency would also help both countries replace the U.S. dollar for their transactions and investment in the multi-billion dollar China-Pakistan Economic Corridor (CPEC).
This June, the State Bank of Pakistan formally allowed both public and private enterprises to use Chinese currency for bilateral trade and investment activities.
The $54-billion CPEC project aims to connect China’s strategically important northwestern Xinxiang province to the Pakistani port of Gwadar, Baluchistan through a network of roads, railways, and pipelines to transport cargo, oil, and gas.
The economic corridor would not only provide China cheaper access to Africa and the Mideast but also earn Pakistan billions of dollars for providing transit facilities to the world’s second-largest economy.
Under current foreign exchange regulations, the Chinese yuan (CNY) is an approved foreign currency for denominating foreign currency transactions in Pakistan, like other international currencies such as the U.S. dollar and euro.
The State Bank of Pakistan has already put in place the required regulatory framework facilitating the use of the yuan in trade and investment transactions such as the opening of letters of credit and availing financing facilities.