Pakistan is one of the leading countries to use RMB for international trade settlement, according to China Economic Net (CEN). Last November, People’s Bank of China (PBOC) signed a memorandum of cooperation (MOC) on establishing RMB clearing arrangements in Pakistan, with Karachi Branch of the Industrial and Commercial Bank of China (ICBC) acting as the RMB clearing bank. It bodes well for Pakistan to join the RMB settlement service as it encourages industrial transfer by assuaging the concerns of Chinese investors on financial losses due to the violently fluctuating exchange rate in Pakistan. As more progress is yet to unfold, RMB-PKR de-dollarisation is expected to play a catalysing role in Pakistan-China trade.
According to Guan Tao, a chief economist of a leading Chinese securities trader, the overall gloomy outlook on global economy this year and the international confidence in China’s performance are enhancing the attractiveness of RMB assets. Meanwhile, against the backdrop of volatile US dollar policies, more countries are diversifying their currency portfolio to hedge against financial risks. RMB, as the fifth largest currency for international payments and foreign exchange transactions, is eyeing a boom in its international usage.
In recent years, China has been ramping up support for RMB clearing and settlement in its foreign trade, especially with Belt and Road countries. In 2021, China’s RMB settlements with Belt and Road countries stood at RMB 5.42 trillion, up 19.6 percent year on year, as per a report released by the People’s Bank of China (PBOC).
This week Brazil and China reached a deal to trade in their own currencies, ditching the US dollar as an intermediary. This move followed the signing of a memorandum of cooperation earlier this year to establish renminbi (RMB) clearing arrangements in Brazil, according to Chinese Foreign Ministry Spokesperson Mao Ning. “These arrangements will help enterprises and financial institutions in both countries conduct cross-border transactions using the RMB. They will also further facilitate bilateral trade and investment”, she added.