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.


‘Get prices down’ Trump tells OPEC

Updated 20 September 2018
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‘Get prices down’ Trump tells OPEC

  • Trump highlights US security role in region
  • Comments come ahead of oil producers meeting in Algeria

LONDON: US president Donald Trump urged OPEC to lower crude prices on Thursday while reminding Mideast oil exporters of US security support.
He made his remarks on Twitter ahead of a keenly awaited meeting of OPEC countries and its allies in Algiers this weekend as pressure mounts on them to prevent a spike in prices caused by the reimposition of oil sanctions on Iran.
“We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices!” he tweeted.
“We will remember. The OPEC monopoly must get prices down now!”
Despite the threat, the group and its allies are unlikely to agree to an official increase in output, Reuters reported on Thursday, citing OPEC sources.
In June they agreed to increase production by about one million barrels per day (bpd). That decision was was spurred by a recovery in oil prices, in part caused by OPEC and its partners agreeing to lower production since 2017.
Known as OPEC+, the group of oil producers which includes Russia are due to meet on Sunday in Algiers to look at how to allocate the additional one million bpd within its quote a framework.
OPEC sources told Reuters that there was no immediate plan for any official action as such a move would require OPEC to hold what it calls an extraordinary meeting, which is not on the table.
Oil prices slipped after Trumps remarks, with Brent crude shedding 40 cents to $79 a barrel in early afternoon trade in London while US light crude was unchanged at about $71.12.
Brent had been trading at around $80 on expectations that global supplies would come under pressure from the introduction of US sanctions on Iranian crude exports on Nov. 4.
Some countries has already started to halt imports from Tehran ahead of that deadline, leading analysts to speculate about how much spare capacity there is in the Middle East to compensate for the loss of Iranian exports as well as how much of that spare capacity can be easily brought online after years of under-investment in the industry.
Analysts expect oil to trend higher and through the $80 barrier as the deadline for US sanctions approaches.
“Brent is definitely fighting the $80 line, wanting to break above,” said SEB Markets chief commodities analyst Bjarne Schieldrop, Reuters reported. “But this is likely going to break very soon.”