BEIJING - Pakistan’s central bank approval for usage of the Chinese yuan as a settlement currency will help enhance China-Pakistan bilateral trade relationship and speed up the internationalization of the Chinese currency, Liu Zhiqin, a senior fellow at the Chongyang Institute for Financial Studies said on Friday.

Pakistan will allow Chinese currency to be used for imports, exports and financing transactions for bilateral trade and investment activities.

According to a statement issued by State Bank of Pakistan (SBP), a regulatory framework including the opening of letters of credit, clearing of transactions and financing facility in the yuan has already been put in place.

This issue has been discussed for many months, according to Liu Zhiqin. “And actually, we have already discussed with many experts and think tanks from Pakistan, about the problems we are facing, the future of the yuan’s usage in Pakistan, the advantages for both sides and the risky problems in the process.”

Bilateral trade between China and Pakistan is growing fast. Official data showed that the bilateral trade reached 11.5 billion US dollars in the first seven months of 2017. That was an increase of 6.4 percent year on year.

Besides, China signed new project contracts worth 4.84 billion US dollars with Pakistan last year from January through July, finalizing 5.2 billion US dollars in contracted projects.

Now, the significant approval may mean the replacement of the US dollar for transactions in China-Pakistan Economic Corridor projects. And the support will benefit both countries, in Liu’s view.

“For the moment, Pakistan has difficulty to fulfill all these payments because of the shortage of US dollars. Pakistan needs additional and alternative to support the country’s payment capability. And RMB is the best solution for Pakistan. As for China, Chinese companies and investors can directly use RMB [in Pakistan], without exchange rate or currency risk,” Liu told the state-run China Global Television Network (CGTN).

Moreover, Liu noted that this progress is meaningful for the internalization of the yuan, as it provided a new idea to boost Chinese currency going abroad.

“The yuan’s internalization is a long way to go. I prefer to see, for the internalization of RMB, we should do firstly more regionalization of the yuan,” Liu explained. “If all the regions can accept the yuan as the settlement, payment and clearing currency, I think there is no question for the whole world to accept China.”

But Liu also admitted the internalization of the yuan is not an easy job. The main point, from his perspective, is how to be well-accepted by developed countries.

“The main point is that RMB should be well-accepted by developed countries. If they accept RMB, the currency will be stronger,” Liu explained. “But of course, on the first stage, we should do our best to do in the developing countries.”

PAK-CHINA CSA A BRILLIANT

MOVE: PBIF

INP: President Pakistan Businessmen and Intellectuals Forum (PBIF), Mian Zahid Hussain on Friday termed Pak-China Currency Swap Agreement (CSA) a brilliant move.

The business community welcomes the deal which will reduce country’s dependence on the US which has crossed all limits to malign and damage Pakistan to please India and cheat its own masses, he said.

Government’s move to allow the Yuan to be used for imports, exports and financing transactions will water down the impact of threats of US President who is blaming Pakistan for the failure of America in Afghanistan, he added.

Mian Zahid Hussain said that after the CSA, Pakistan may not need IMF help as badly as expected which will help the government to avoid harsh conditions linked to the loan of the international lender as China has provided a loan of 10 billion Yuan to Pakistan which is almost equal to 8.5 billion dollars.

He said that the government and private sector of both the countries should be encouraged to use Yuan for trade and investment which will push bilateral ties to the new altitude.

Yuan is at par with other international currencies such as USD, Euro and JPY while Chinese economy is more stable than rest of the countries, therefore, it will yield many long-term benefits for both the friendly nations, the veteran business leader said.

The recent local and global economic developments, particularly the threats by the US President and the growing size of trade and investment with China the use of Yuan will increase significantly and will yield long-term benefits for both the countries, their business communities and masses.

Over the decades, China has proved to be much more trustworthy than America, therefore, the dollar should no more remain dominated on the economic scene, the former minister said.