Prime Minister Shehbaz Sharif's visit to China would help the finance sector of Pakistan to boost cooperation with China and improve the balance of trade, said Shaikh Muhammad Shariq, Gwadar Pro reported on Thursday quoting Chief Representative of the National Bank of Pakistan in China. "China’s Belt and Road Initiative (BRI) serves as an important platform for internationalising the RMB, boosting its use both as a trade and financing currency.  Modernising the trading routes along B&R should not only increase RMB cross-border trade with these countries, but also further promote the currency in the offshore market, and will increase liquidity in those countries thereby enabling further RMB business", he added.

He further said that China-Pakistan Economic Corridor, commonly known as CPEC, being one of BRI’s main elements, offers a textbook example of how China and BRI partner countries can advance cooperation over the use of RMB. "With existing and potential trade volumes between China and Pakistan on the rise, the internationalisation of RMB is one of the keys to cost-efficient economic growth for both countries and more cooperation in the banking sector is expected", Shariq mentioned. He said that the increased bilateral trade between Pakistan and China and the volume of investments under CPEC have opened up possibilities for replacing US dollars with RMB in bilateral trade.

"China and Pakistan signed a bilateral free trade agreement in 2007 and bilateral trade grew rapidly over the following decade.  As trade links grew, central banks agreed on currency swaps, and the first currency swap agreement was signed in 2011,” he stated, adding that “in 2018, both countries also agreed to extend the currency swap agreement for a further period of three years and double its size from RMB 10 billion to 20 billion and from Rs. 165 billion to Rs. 351 billion". Shaikh further said that it is expected to promote the opening and development of the securities markets, strengthen the cooperation between stock exchanges of the two countries, to support the enterprises and financial institutions in carrying out direct financing for projects along the CPEC in each other's capital markets.

"Next year Pakistan would complete many projects, especially in Gwadar like Gwadar Airport, Gwadar exhibition centreand promote the construction of Gwadar Port Free Zone and explore RMB offshore financial business, and also strengthen financial cooperation between their Free Trade Zones and explore the formation of an RMB backflow mechanism," he told Gwadar Pro. He said that these steps also show that measures for the internationalisation of RMB adopted by China are gaining more support and trust in the international community, encouraging the use of Chinese currency in trade activities.

Credit: Independent News Pakistan-INP