China visit to help boost trade cooperation with Pakistan

ISLAMABAD: The just concluded visit of the prime minister to China would greatly help in boosting finance sectors cooperation of the two countries with special emphasis on a dominating role of Chinese currency, RMB.

The RMB’s internationlisation would bring about new phenomenon of cooperation in economic sector. Sources associated with the Pakistan-China cooperative projects, who accompanied the prime minister during the China visit, told The News on Thursday that whirlwind visit of PM Shehbaz Sharif turned up to be highly productive and successful.

Finance Minister Senator Muhammad Ishaq Dar, Planning Minister Ahsan Iqbal and Foreign Minister Bilawal Bhutto Zardari had completed their spadework and for the reason the visit yielded commendable outcome. The RMB would factor in, in a big way. Sources 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.

“The visit to China would help the finance sector of Pakistan to boost cooperation of two countries and improve the balance of trade while China’s Belt & Road Initiative (BRI) serves as an important platform for internationalising the RMB, boosting its use both as a trade and financing currency. The restructuring of 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,” the sources pointed out.

The China-Pakistan Economic Corridor (CPEC), being a flagship project of the BRI, offers a textbook example of how China and BRI partner countries could advance cooperation over the use of RMB. The sources reminded that with existing and potential trade volumes between Pakistan and China 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.

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. The sources recalled that Pakistan and China inked 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.

In 2018, both countries 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 Rs165 billion to Rs351 billion. Sources said it was 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.

It has also been pointed out that Pakistan would complete many projects next year, especially in Gwadar like Gwadar Airport, Gwadar exhibition centre and promote the construction of Gwadar Port Free Zone and explore RMB offshore financial business, and strengthen financial cooperation between their Free Trade Zones (FTZs) and explore formation of an RMB backflow mechanism.

Sources are confident that the steps in question 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. Some influential and financially strong capitals are frightened with the rise of RMB and its foreseeable influence in the world economy, the sources added.