The central banks of China and Pakistan inked a Memorandum of Cooperation (MOC) on Yuan clearing in Pakistan, aiming to promote bilateral trade and investment between the two countries.
The establishment of the Yuan clearing arrangement in Pakistan will help financial institutions and enterprises of both countries in carrying out cross-border transactions in Yuan, according to the announcement made by the People’s Bank of China (PBC) on Wednesday.
The MOU was signed by Governor State Bank Jameel Ahmad and Governor People’s Bank of China Yi Gang.
The establishment of the RMB clearing arrangement in Pakistan will further boost the usage of RMB for cross-border transactions among Chinese and Pakistani enterprises and financial institutions, the State Bank of Pakistan said in a statement.
The development is being seen in the economic sector as something that might also help Pakistan in buying discounted Russian oil, as the Yuan was acceptable to Russia. Presently, Pakistan is making oil payments in US dollars.
Earlier in October, a US State Department spokesperson told reporters that Pakistan could be one of the recipients of a US decision to “keep Russian oil available” in the market for lower and middle-income countries.
The spokesperson highlighted that this relaxation should not be seen as a step towards easing the sanctions the US had imposed on Russia for invading Ukraine in February this year. He was, however, quick to clarify that “other countries will have to make their own choices based on their own circumstances in terms of energy imports”.
The news comes at a time when Pakistani Prime Minister Muhammad Shehbaz Sharif is visiting China. During Sharif’s visit, the two states signed and concluded a number of agreements covering bilateral cooperation in areas including:
- Digital economy
- Financial cooperation
- Export of agricultural products
- Protection of cultural property, and
Currency swap deal
Previously in 2011, the People’s Bank of China had signed a 10-billion-yuan ($1.58 billion) currency swap deal with the State Bank of Pakistan to promote bilateral financial cooperation and to boost trade and investment.