Pakistan China decided to ditch dollar in bilateral trade.

[Foxtrot Delta]

Forget everyone else... from where Pakistan will get billions of Yuan to pay the imbalance trade in China's favor?

read my earlier post again, we dont pay in yuan we pay in Rupee which is pakistani currency. and chinese pay in yuan which is chinese currency.

i see gold or silver standard coming back to the world in a few decades if this continues.

 

[ziaulislam]

read my earlier post again, we dont pay in yuan we pay in Rupee which is pakistani currency. and chinese pay in yuan which is chinese currency.

i see gold or silver standard coming back to the world in a few decades if this continues.

apart from ease of business and currency swap this has no importance ..

 

[BATMAN]

read my earlier post again, we dont pay in yuan we pay in Rupee which is pakistani currency. and chinese pay in yuan which is chinese currency.

i see gold or silver standard coming back to the world in a few decades if this continues.

Thanks for clarification... i started with the same basic question until you helped out.
I understood now and its indeed great for Pakistan.

 

[nahtanbob]

Not all trades between Pakistan and China will go straight to yuan and rupee, but a gradual shift. Last year, nine percent of payments for supplies from Russia to China were made in rubles; Russian companies paid 15 percent of Chinese imports in the renminbi.

Direct payments in the Rupee-yuan pair does not imply the participation of American, British, or EU banks. This significantly reduces the control of the West from ongoing transactions, and makes the trade turnover between Pakistan and China independent. Moreover, such payments can be made without SWIFT through the China International Payments System (CIPS).

without a plan on how to handle the surpluses the whole thing is hot air

 

[Foxtrot Delta]

without a plan on how to handle the surpluses the whole thing is hot air

true but the surplus would need atleast a year to tell the complete story . we all know china will be at an advantage here.

but for now we won't need USD in our reserves to trade with china and get stuff we need. For now. it gives some breathing HOT air in winter.

it will be interesting to see how Russia , iran , pakistan and china will deal with the problems they face without USD as standard. i fear they might put oil as standard that can be dangerous and Good at the same time. with Russia and iran having Huge oil reserves.

interesting to note is india ditched USD in arms deals with Russian federation too.

apart from ease of business and currency swap this has no importance ..

the biggest blessing is we don't need United states Dollars in our reserves to do trade with china. with this in action if implimented on 100% trade deals. China might take the number 1 spot as a trade partner with pakistan. instead of United states currently.

 

[nahtanbob]

true but the surplus would need atleast a year to tell the complete story . we all know china will be at an advantage here.

but for now we won't need USD in our reserves to trade with china and get stuff we need. For now. it gives some breathing HOT air in winter.

it will be interesting to see how Russia , iran , pakistan and china will deal with the problems they face without USD as standard. i fear they might put oil as standard that can be dangerous and Good at the same time. with Russia and iran having Huge oil reserves.

interesting to note is india ditched USD in arms deals with Russian federation too.



the biggest blessing is we don't need United states Dollars in our reserves to do trade with china. with this in action if implimented on 100% trade deals. China might take the number 1 spot as a trade partner with pakistan. instead of United states currently.

if every country had no surplus with others there would no need for US Dollar. countries have surpluses and deficits.

you need US Dollars to do business with China because at the end of the day Chinese trust the US dollar over whatever Pakistani currency. if china & pakistan do not want the us dollar you have to come up with alternate currency or gold bullion.

india and russia trade is limited in value. it is easy to convert it in a barter transaction. it will be interesting if India and china can eliminate the dollar in their bilateral transactions. it is unlikely because of the huge surplus in favor of china

 

[Hakikat ve Hikmet]

So basically we help Yuan to become an alternate currency of trade!
What's the gain in it for Pakistan?
from my PoV, if we keep our reserves in $ they don't loose value as fast as other currencies and are widely accepted.
At the end of the day, if we buy Yuan from $ reserves we gain and if we by $ from Yuan reserves we loose.

Hence, I mentioned SK, Singapore etc.!!! Where they were and where they're now courtesy of the USA!!!! Both Pak and China are taking calculated risks with the higher marginal utilities from their respective sides!!! Let's see what happens...

A life devoid of tests/experiments isn't worth living - Socrates

 

[Foxtrot Delta]

A currency swap is similar to an interest rate swap, except that in a currency swap, there is often an exchange of principal, while in an interest rate swap, the principal does not change hands.

In currency swap, on the trade date, the counter parties exchange notional amounts in the two currencies. For example, one party receives $10 million British pounds (GBP), while the other receives $14 million U.S. dollars (USD). This implies a GBP/USD exchange rate of 1.4. At the end of the agreement, they will swap again using the same exchange rate, closing out the deal.

Since swaps can last for a long time, depending on the individual agreement, the exchange rate in the market place (not on the swap) can change dramatically over time. This is one of the reasons institutions use these currency swaps. They know exactly how much money they will receive and have to pay back in the future.

During the term of the agreement, each party pays interest periodically, in the same currency as the principal received, to the other party. There are number of ways interest can paid. It can paid at a fixed rate, floating rate, or one party may pay a floating while the other pays a fixed, or they could both pay floating or fixed rates.

On the maturity date, the parties exchange the initial principal amounts, reversing the initial exchange at the same exchange rate.

 

[nahtanbob]

true but the surplus would need atleast a year to tell the complete story . we all know china will be at an advantage here.

but for now we won't need USD in our reserves to trade with china and get stuff we need. For now. it gives some breathing HOT air in winter.

it will be interesting to see how Russia , iran , pakistan and china will deal with the problems they face without USD as standard. i fear they might put oil as standard that can be dangerous and Good at the same time. with Russia and iran having Huge oil reserves.

interesting to note is india ditched USD in arms deals with Russian federation too.



the biggest blessing is we don't need United states Dollars in our reserves to do trade with china. with this in action if implimented on 100% trade deals. China might take the number 1 spot as a trade partner with pakistan. instead of United states currently.

As I indicated if two countries have a balanced trade they can ditch the US dollar. the problem arises when there is a imbalance especially a huge one

If you buy more than more than what you sell you need something other than Pakistani rupees to pay for

you have such a large imbalance with China that it won't last beyond 2 months

very few countries have need for Pakistani rupees. What can I purchase in Pakistan ?

 

[Foxtrot Delta]

its not a global deal. its only with china. we have stuff to buy from china. and china has stuff to buy from pakistan. the imbalance will be taken care off in a year's time. for now its not 100% trade in this manner . it is going to be gradual.

the deal was in planning phase for a while. its still being worked out. most likely they will need a standard to replace USD. my fear is they might decide oil to be the deciding factor which i feel is wrong.

 

[nahtanbob]

its not a global deal. its only with china. we have stuff to buy from china. and china has stuff to buy from pakistan. the imbalance will be taken care off in a year's time. for now its not 100% trade in this manner . it is going to be gradual.

reminds me of the following story

a bunch of mice are afraid of a mean cat. they ask for a plan to deal with the cat. One young mouse suggests the hanging of a bell around the cat's neck. when the cat is approaching they will hear the bell. all the mice applaud the plan. one old wise mouse asks who will place the bell on the cat's neck. there is dead silence

 

[LeGenD]

Pakistan isn't iraq nor libya. they can't come after us for ditching the usd.

I am not sure why you drew this conclusion. CPEC is not about "oil production."

Title of this thread is sensational: https://defence.pk/pdf/threads/how-many-chinese-yuans-do-we-need-anyway.586060/

USD is not going anywhere.

Chinese Yuan is a global reserve currency, and CPEC is happening. Therefore, it is logical for SBP to facilitate trading in Yuan and maintain its reserves.

Please keep in mind that US pushed China to float Yuan in foreign markets and allow foreign markets to influence its value much like in the case of USD. US have accused China of manipulating its currency (keeping its value artificially low by not floating it in foreign markets). Consequently, IMF awarded global reserve currency status to Yuan in 2015, to enable China to float Yuan in foreign markets.

From IMF:-

Our analysis suggests that the international monetary system has transitioned from a bi-polar system - consisting of the U.S. dollar and the euro - to a tri-polar one that includes the renminbi. The dollar bloc is estimated to continue to dominate, having the largest share in global GDP (40 percent), followed by the renminbi (30 percent) and the euro blocs (20 percent). The geographical area of influence for the RMB bloc appears to be most evident among the BRICS’ currencies. The British pound and the Japanese yen blocs appear to play minor roles.

Source: https://www.imf.org/en/Publications...-Changing-International-Monetary-System-45586

Excessively strong USD have taken a toll on American business prospects over the course of years - this was the price Americans had to pay for USD being the top global reserve currency. The world of economics is fair to nobody.

Pakistan is not stupid. We try to play it safe in the international stage.

@BHarwana