Pakistan encouraged to use Yuan amid China's de-dollarization trend

[CrazyZ]

Pakistan encouraged to use Yuan amid China's de-dollarization trend

As China’s Belt and Road Initiative (BRI) has boosted the global use of the yuan, Pakistan, which is a part of the project, has been increasingly encouraged to use the Chinese currency in its business dealings with Beijing instead of doing trade in the US dollar, the Global Times reported.

Despite the yuan skyrocketing in popularity in Southeast Asia, relatively stringent foreign exchange policies in some BRI markets are restricting the currency’s internationalization in the short term.

“On the positive side, the growing pace of yuan use in BRI countries has been faster than the yuan’s overall usage in the world in recent years. The trend is particularly evident in some Southeast Asian countries like Singapore”, Zhou Yu, director of the Research Centre for International Finance at the Shanghai Academy of Social Sciences, was cited as saying.

Pakistan and China agreed to ditch the greenback and start trading in yuan in bilateral relations in November 2018.

"The agreement is part of practical steps being taken [by China] to support our [foreign] currency [reserves]”, Pakistani Information Minister Fawad Chaudhry said at the time.


The central State Bank of Pakistan immediately declared the yuan an approved foreign exchange for all purposes in the country.

China has increasingly been using the yuan, which was included in the Special Drawing Right (SDR) basket in 2016 alongside the US dollar, the Japanese yen, the euro, and the British pound, in bilateral trade with a number of countries, including Russia.

In addition, Beijing has been on a gold-buying spree for several months now as part of the country’s strategy to move away from the US dollar.

China’s decision to boost its gold reserves after a two-year hiatus coincided with similar efforts by world central banks to shift away from the greenback.


According to the People’s Bank of China, it increased its reserves by 10 tonnes in February, following the acquisition of 11.8 tonnes in January and 9.95 tonnes in December, thus bringing overall holdings to 1,874 tonnes, or 60.26 million ounces. In January, China had the sixth largest gold reserves in the world, slightly lagging behind Russia.

https://nation.com.pk/06-May-2019/pakistan-encouraged-to-use-yuan-amid-chinas-de-dollarization-trend

 

[GumNaam]

excellent. the dollar can go to hell, the most debt ridden currency in history!

 

[Abdussamad]

this is the same old tried and failed plea. yuan swap facility has been available for years but importers don't use it because you can't under invoice your imports if you use the yuan. how about they do something to make it practical?

 

[Murgah]

this is the same old tried and failed plea. yuan swap facility has been available for years but importers don't use it because you can't under invoice your imports if you use the yuan. how about they do something to make it practical?

You can used yuan in trade with chinese and pakistan import from china is stood 12 billion dollars

 

[VCheng]

Pakistan and China agreed to ditch the greenback and start trading in yuan in bilateral relations in November 2018.

Taking the dollar out of this portion of trade must have helped Pakistan's BoP issue in terms of USD, surely.

 

[Abdussamad]

You can used yuan in trade with chinese and pakistan import from china is stood 12 billion dollars

Try reading what I wrote...

Taking the dollar out of this portion of trade must have helped Pakistan's BoP issue in terms of USD, surely.

It's never been used for its intended purpose for the reasons I stated above. Instead the SBP uses it as a credit line to borrow dollars from the Chinese.

 

[VCheng]

It's never been used for its intended purpose for the reasons I stated above. Instead the SBP uses it as a credit line to borrow dollars from the Chinese.

But I thought that the whole point of the bilateral agreement was to move away from the USD.

 

[Abdussamad]

But I thought that the whole point of the bilateral agreement was to move away from the USD.

In 2013 then SBP Governor Yasin Anwar had said that the facility was utilised to arrange dollars for balance of payments support at a time when the country’s reserves were dangerously low. Those drawings were subsequently repaid by the PML-N government.

http://return.pk/2018/12/26/traders...s-for-slow-response-to-yuan-based-settlement/

Also from a more reputable source:

The first auction of yuan was held in June 2013. Not a single bank submitted a bid. There was no interest whatsoever from the market.
...
During that time, then governor of the State Bank, Yasin Anwar, managed to use the swap facility to draw a large amount of yuan (the exact number was never officially announced, but I think I once heard him say at a public event that it was equivalent to $1bn), convert them into dollars, and place the resultant funds in the reserves, thereby pushing the approaching balance-of-payments crisis down by a few months.

The real reason why traders don't use it:

When I spoke to a group of importers about why there was such a lack of interest in the yuan for settlement of trade payments with China, I received three responses. Some said they were fine with the dollar and simply not interested in the change. Others said the yuan was less stable against the rupee compared to the dollar (the yuan was Rs14 back in 2011, it is Rs17 now), and they did not want to deal with the exchange rate risk. Another group said that the yuan facility requires the transaction to be conducted through a letter of credit issued by a bank, whereas a large amount of under-invoicing takes place in imports from China, where the balance payment is made through an exchange company for concealment.

 

[CrazyZ]

The Yuan's position as a global reserve currency will increase simply due to the size of the Chinese economy. Dollar will remain dominate and important for some time. You can only maintain reserves if you have a current account surplus, which Pakistan does not (hence the current crisis). Building a Yuan reserve is even harder since we have a large trade deficit with China.

 

[Samlee]

Nice Idea

 

[HAIDER]

replacing yuan with dollar is dangerous move .... china wants first dollar confrontation through Pakistani markets ..... watch out ....

 

[Abdussamad]

replacing yuan with dollar is dangerous move .... china wants first dollar confrontation through Pakistani markets ..... watch out ....

We actually use it to borrow dollars

 

[maximuswarrior]

this is the same old tried and failed plea. yuan swap facility has been available for years but importers don't use it because you can't under invoice your imports if you use the yuan. how about they do something to make it practical?

Stop being a pessimist and skeptical.

This is a sound plan and Pakistan should by all means go ahead. In the years to come China is going to drastically overtake US trade. It makes sense to certainly diversify. If we don’t ditch the dollar entirely we should still definitely use the Chinese currency to trade.

 

[HAIDER]

We actually use it to borrow dollars

this is chinese move and we have no choice to fall for it.

 

[maximuswarrior]

The Yuan's position as a global reserve currency will increase simply due to the size of the Chinese economy. Dollar will remain dominate and important for some time. You can only maintain reserves if you have a current account surplus, which Pakistan does not (hence the current crisis). Building a Yuan reserve is even harder since we have a large trade deficit with China.

The trade deficit is something that Pakistan and China must work out. It is achievable, it we should also make the effort.