New Delhi: Pakistan has decided to allow the Chinese Yuan to be used for imports, exports and financing transactions for bilateral trade and investment activities to simplify a massive Chinese investment project.
According to a statement issued by the central State Bank of Pakistan, “Both public and private sector enterprises may use the Yuan for bilateral trade and investment.”
“As per current foreign exchange regulations, Chinese Yuan (CNY) is an approved foreign currency for denominating foreign currency transactions in Pakistan,” it said.
“In terms of regulations in Pakistan, CNY is at par with other international currencies such as USD, Euro, and JPY,” it added.
The bank said that in light of a massive Chinese infrastructure project in Pakistan, the move would “yield long-term benefits for both the countries”.
The adoption of Yuan means that Pakistan and China would be able to replace the US dollar for transactions in the $50-billion China Pakistan Economic Corridor (CPEC) projects.
Ahsan Iqbal, the Minister for Planning and Development, had said on December 19 that the government was considering a Chinese proposal to use renminbi or Yuan instead of the US dollar for payments in all bilateral trade.
“The SBP, in the capacity of the policymaker of financial and currency markets, has taken comprehensive policy related measures to ensure that imports, exports, and financing transactions can be denominated in Yuan,” according to a report in a Pakistani newspaper.
In Pakistan, Yuan is an approved currency for denominating foreign currency transactions.
The SBP has already put the required regulatory framework in place which facilitates the use of Yuan in trade and investment transactions such as opening of letter of credits (LCs) and availing of financing facilities in Yuan, the report said.
In terms of regulations in Pakistan, Yuan is on par with other international currencies such as the dollar, euro and Japanese yen.
Sri Lanka’s economic hara-kiri
Islamabad had been mulling about this change since mid-December and after Trump’s tweet on Pakistan’s “lies & deceit” analysts are seeing this move as a signal to the Trump administration that Pakistan is not dependent on America anymore.
While China is giving Pakistan $50 billion in CPEC it should be noted that Beijing does not give anything to anyone for free. It charges high-interest rates and Sri Lanka is the best example in this context. China is investing billions of dollars in infrastructure and developments in Sri Lanka, but many local citizens feel the country is being sold to the Chinese.
Hambantota – a strategic southern port was built by a Chinese company and funded by Chinese loans. But now Sri Lanka is struggling to repay that money and has decided to give a Chinese firm a stake in the port to ease the debt.
Last month, Sri Lanka formally handed over the port to China on a 99-year lease.
Two Chinese firms — Hambantota International Port Group (HIPG) and Hambantota International Port Services (HIPS) — managed by the China Merchants Port Holdings Company (CMPort) and the Sri Lanka Ports Authority will own the port and the investment zone around it.
This grant of large tax concessions to Chinese firms have also been questioned by the Opposition.
With this plan to trade in Yuan, Islamabad is heading towards a point of no return and this might lead to the economic hara-kiri of Pakistan – a country in crisis.