Top officials of SBP informed this welcoming development to Special Investment Facilitation Council (SIFC)         The aerial photo taken on January 4, 2023, shows shipping containers stacked at Nanjing port in China's eastern Jiangsu province. — AFP

ISLAMABAD: The bilateral trade between China and Pakistan has increased in Chinese currency (RMB) to more than 14 percent in 2023 from two percent in 2018.

Top officials of State Bank of Pakistan (SBP) informed this welcoming development to the Special Investment Facilitation Council (SIFC), saying necessary regulatory framework for the settlement of trade in RMB is in place. The SBP has designated three banks — ICBC (Industrial and Commercial Bank of China), BOC (Bank of China) and SCB (Standard Chartered Bank) — to establish local RMB and clearing setup to establish local RMB settlement.

“The increase in RMB trade has eased the pressure on Pakistan which is facing balance of payment issue and fluctuating foreign exchange reserves in US dollars,” a top official who was a part of January 3 SIFC meeting said.

“The People’s Bank of China (PBC) and SBP signed a Memorandum of Understanding (MoU). The People’s Bank of China has authorised ICBC to act as an RMB clearing bank in Pakistan. It caused an increase in trade with China in RMB up to 14 percent in 2023,” he said. The establishment of a regulatory framework, the official said, is to be communicated to importers/exporters and other interested investors. An update is to be presented in the next executive committee of SIFC. He said the Chinese currency has started putting tough challenges to US dollar in trade transactions. In Pakistan, Chinese currency footprints have also increased which is now clearly visible, he added. He said Pakistan’s trade with Russia on fuel is also in Chinese currency and with Beijing trade is being carried out in RMB. Its use in trade transactions has increased to 14 percent, he said.

According to NIKKEI Asia, China’s yuan has risen to 4th most used currency in global settlements. China’s currency was used more than Japan’s for international payments in November for the first time since January 2022, capturing the fourth-largest share. The data comes from the Swift international payment service. The use of yuan for oil and other transactions with Russia is increasing due to sanctions from the West in the wake of its invasion of Ukraine. For trading in November, the yuan’s share among all currencies was 4.61pc, the highest since the earliest data available in 2015. Heading the list was the US dollar with 47.08pc, followed by Euro with 22.95pc and British pound with 7.15pc. The yen’s share was 3.41pc.

China has been pushing for payments in currencies other than dollars in trade with Russia, Middle East and South America.