The volume of bilateral trade between China and Pakistan conducted in the Chinese yuan (RMB) has seen a significant increase, reaching more than 14 percent in 2023, up from just two percent in 2018.
This information was revealed by top officials of the State Bank of Pakistan (SBP) during a meeting with the Special Investment Facilitation Council (SIFC).
The SBP has taken concrete steps to facilitate this shift by designating three banks – the Industrial and Commercial Bank of China (ICBC), the Bank of China (BOC), and Standard Chartered Bank (SCB) – to establish local RMB clearing and settlement setups.
This move is part of a broader strategy to ease pressure on Pakistan’s balance of payments and stabilize its fluctuating foreign exchange reserves, which are predominantly in US dollars.
A senior official present at the January 3 SIFC meeting highlighted that the increase in RMB trade was a result of the Memorandum of Understanding (MoU) signed between the People’s Bank of China (PBC) and the SBP, authorizing ICBC to act as an RMB clearing bank in Pakistan.
This shift towards RMB in trade transactions is not only significant for Pakistan but also marks a global trend.
According to NIKKEI Asia, the Chinese yuan has ascended to the fourth most used currency in global settlements.
In November, it surpassed Japan’s yen in international payments for the first time since January 2022, as reported by Swift international payment service. The yuan’s global usage for trade in November was at 4.61 percent, the highest since data collection began in 2015.
This increase is partly attributed to China’s push for using currencies other than the US dollar in its trade with countries like Russia, Middle East, and South America, particularly following Western sanctions on Russia due to its invasion of Ukraine.
In Pakistan, the increased use of the Chinese currency is also evident in its trade with Russia, particularly for fuel transactions, further underscoring the yuan’s growing prominence in international trade.
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