ISLAMABAD: China and Pakistan signed an agreement for using Chinese currency, RMB for their mutual trade and clearing arrangements.
At present, the volume of mutual trade between Pakistan and China is around $20 billion which will be diverted to the Chinese currency instead of US dollar.
This strategic decision will ease transfer of funds for reviving Chinese-backed projects in Pakistan and it will also reduce demand of US dollar and pressure on foreign exchange reserves of Pakistan.
According to SBP, a memorandum of understanding (MoU) was signed between the State Bank of Pakistan and the Peoples Bank of China (PBoC) on Wednesday.
SBP Governor Jameel Ahmad and his Chinese counterpart PBoC Governor Yi Gang signed the agreement.
The central bank said, the RMB clearing arrangement in Pakistan will further boost usage of Chinese currency for cross-border transactions among Chinese and Pakistani enterprises and financial institutions.
The arrangement will also enhance bilateral trade and investment between Pakistan and China.
The establishment of an RMB clearing unit in the country means that Pakistan may no longer have to use its precious reserves of US dollars to trade with China.
Moreover, when funding China-backed mega projects in the country, China too will not have to rely on sending Pakistan US dollars.
