Pakistani and Chinese businesses free to choose the yuan for bilateral trade and investment

A Pakistani currency dealer counts Chinese currency for a customer in Quetta. Pakistan will allow the Chinese yuan to be used for imports, exports and financing transactions for bilateral trade and investment activities, in a move economists said would simplify a massive Chinese investment project. (AFP)
Updated 04 January 2018
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Pakistani and Chinese businesses free to choose the yuan for bilateral trade and investment

KARACHI: State Bank of Pakistan (SBP) has taken steps to ensure that imports, exports and financing transactions can be denominated in Chinese Yuan (CNY).
Both public and private-sector enterprises in Pakistan and China are free to choose CNY for bilateral trade and investment activities, the country’s central bank announced on Tuesday.
Chinese yuan, under current foreign exchange regulations, is an approved foreign currency for denominating foreign currency transactions in Pakistan.
The SBP has already put in place the required regulatory framework which facilitates use of CNY in trade and investment transactions such as the opening of letter of credits (l/cs) and availing financing facilities in CNY.
In terms of regulations in Pakistan, CNY is on a par with other international currencies such as the US dollar, euro, and Japanese yen, the spokesman of SBP said.
After signing the currency swap agreement (CSA) with People’s Bank of China (PBoC), the SBP had taken a series of steps to promote use of CNY in Pakistan for bilateral trade and investment with China. The SBP allowed banks to accept CNY deposits and give CNY trade loans.
The central bank said that the Industrial and Commercial Bank of China Limited (ICBC) Pakistan has been allowed to establish a local CNY settlement and clearing setup in Pakistan enabling it to open CNY accounts of the banks operating in Pakistan and to facilitate settlement of CNY based transactions such as remittance to and from China. With the opening of Bank of China in Pakistan, the access to onshore Chinese markets will strengthen further. Apart from the above, several banks in Pakistan maintain onshore CNY nostro accounts.
The central bank had permitted authorized dealers to open foreign currency accounts and extend trade loans under the FE-25 scheme in US dollars, pound sterling, euros, Japans yen, Canadian dollars, UAE dirhams, Saudi riyals, Chinese yuan, Swiss francs and Turkish lira.
According to the spokesman, for onward lending the proceeds of currency swap agreement, the SBP has put in place a loan mechanism for banks to get the CNY financing from SBP for onward lending to importers and exporters having underlying trade transactions denominated in CNY.
The currency swap arrangement was executed between State Bank of Pakistan and People’s Bank of China (PBoC) on Dec. 31, 2011. The central bank had explained the modus operandi of this liquidity facility for banks.
The bank through a circular had allowed all authorized dealers to take foreign exchange deposits and extend loans in CNY for financing of imports and exports in accordance with prevailing instructions on loans and deposits. In order to provide CNY funding to scheduled banks, so that they can lend CNY to importers and exporters with underlying trade documents in CNY, the SBP will conduct competitive auctions of Chinese yuan loan facility using proceeds of the currency swap arrangement with the PBoC.
Considering the recent local and global economic developments, particularly with the growing size of trade and investment with China under the China\Pakistan economic corridor (CPEC), the SBP foresees that CNY denominated trade with China will increase significantly and yield long term benefits for both countries.


Shell, Exxon not to seek compensation for end of Dutch gas field production

Updated 25 June 2018
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Shell, Exxon not to seek compensation for end of Dutch gas field production

AMSTERDAM: Energy companies Royal Dutch Shell and Exxon Mobil will not submit a claim for missed revenue due to the Dutch government's decision to halt gas production at the Groningen field by 2030, the Dutch ministry of Economic Affairs said on Monday.
"A lot of gas will be left in the ground," Economy minister Eric Wiebes said at the presentation of his deal with the oil majors responsible for extracting Groningen gas.
"That gas is the property of the oil companies, but they will not submit a claim and the government is not required to compensate them."
The Dutch government in March said it would end gas production at the Groningen field by the end of the next decade, in an effort to stop a string of relatively small, but damaging earthquakes caused by gas extraction.
This will leave around 450 billion cubic meters (bcm) of gas in the ground, Wiebes said, with an estimated value of approximately €70 billion ($81.5 billion).
The decision to halt Groningen production forced the government to broker a new deal with Shell and Exxon Mobil, whose 50-50 joint venture NAM is responsible for the field.
NAM will be required to pump as much gas as the government says is needed in the coming years. In return, it will see its share of the revenue from Groningen rise from 10 to 27 percent, Wiebes said, starting this year.
As part of the deal, NAM will also contribute a total of €500 million to strengthen the economy in the Groningen region.