State Bank of Pakistan has given permission to Bank of China to establish Chinese Yuan Settlement system in Pakistan. It will allow the customers of the bank in Pakistan to make their payments in the Chinese Yuan currency. The aim of this step is to strengthen and boost relations between Pakistan and China.
In a statement, State Bank of Pakistan highlighted that policies that are being made recently are taking in to account the fact that China is the biggest trading partner of Pakistan, thus it has to be ensured that import, exports, trade, and transactions with China were made in Yuan.
Must read: Bank of China starts operations in Pakistan
Before this SBP signed an agreement with People’s Bank of China relating to currency swap. The goal of that agreement was to boost bilateral trade between China and Pakistan.
Now as per a statement the Bank of China is permitted to open yuan bank accounts. With this step taken it will be easier for customers to receive or sent remittances to/from China.
In 2015, State Bank of Pakistan permitted the Industrial and Commercial Bank of China (ICBC) to offer similar services in the country.
State Bank of Pakistan said, “These steps are part of efforts to encourage trade with China in yuan and eventually in the respective local currencies. This settlement and clearing mechanism is expected to reduce costs and increase efficiency for the local banking system in transacting in Chinese yuan, enhance market liquidity and facilitate settlement of growing trade and investment transactions between China and Pakistan in yuan.”
SBP is hopeful that this step will bring long-term benefits for both the countries, strengthen Pakistan’s economy and bring growth in the banking sector of the country.