RMB trade with China grows eightfold in four years

KARACHI: Pakistan’s imports from China denominated in the Chinese currency renminbi (RMB) have increased sharply in the last four years, thanks to the central bank’s efforts to promote its use in bilateral trade, the bank’s governor said on Friday.

"As a result of the Central Bank’s efforts to promote use of RMB in trade with China, RMB denominated imports of Pakistan from China have increased from about 2 percent in FY18 to around 18 percent in FY22," State Bank of Pakistan (SBP) governor Jameel Ahmad said.

Ahmad was speaking at a ceremony 'Promoting the use of RMB in Cross-Border Settlement' in Islamabad to mark the designation of the Industrial and Commercial Bank of China (ICBC) as the RMB clearing agent in Pakistan by the People’s Bank of China (PBoC).

He said the central bank has put in place the required regulatory framework that facilitates the use of RMB in trade and investment transactions, such as opening letters of credit and availing financing facilities in RMB.

"In terms of regulations in Pakistan, RMB is at par with other international currencies, such as the US Dollar, Euro and Japanese Yen," Ahmed said. "Both public and private sector enterprises in Pakistan are free to choose RMB for bilateral trade and investment activities."

The governor also discussed the benefits of local RMB clearing system and denominating trade in RMB, including fast turnaround time and reduced cost for local banking system; easy access to the RMB settlement for the local banking system; improved and more competitive pricing of bilateral trade transactions; and opening up of new markets for Pakistani businesses.

"Banks can play an important role by providing their customers with the necessary information pertaining to the regulatory framework in China to conduct transactions in RMB," he said.

Ahmad also expressed hope that Pakistani businesses will enhance their understanding of the Chinese market and evaluate the benefits of conducting trade in RMB at a more competitive pricing.

Governor SBP viewed that this initiative of establishing local RMB clearing system will yield long-term benefits to China-Pakistan relationship in general, and Pakistan’s economy and banking system in particular.

He reiterated that the SBP remains committed to providing the policy and regulatory support to further strengthen economic and financial ties with China for the mutual benefit of our consumers and businesses.