Pakistan has been encouraged to use Yuan instead of trading in the US dollar. The Belt and Road Initiative of China has given a boost to the global use of Chinese currency Yuan.
Even though the popularity of Yuan has increased with time in Southeast Asia, the severe foreign exchange policies in few of the BRI market has restricted the internationalization of the currency in the short term.
Zhou Yu, director of the Research Centre for International Finance at the Shanghai Academy of Social Sciences said, “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.”
Back in November Pakistan and China agreed to begin trading in Yuan.
Pakistani Information Minister Fawad Chaudhry, “The agreement is part of practical steps being taken [by China] to support our [foreign] currency [reserves]”, said at the time.
Yuan was declared the approved foreign exchange for all purposes in Pakistan by the State Bank of Pakistan.
Yuan was also included in the Special Drawing Right (SDR) basket in 2016, along with the other currencies i.e. US dollar, Japan’s yen, euro, British pound etc.