BEIJING: The People’s Bank of China, the central bank, has forged a cooperation framework with Bank Indonesia, its Indonesian counterpart, for use of local currencies in bilateral trade and investment settlements. The framework, a follow-up to the agreement signed on Sept 30,2020, marks “a key milestone” in strengthening monetary and financial cooperation between the two central banks, the PBOC said on its website.
“It is conducive to promoting the direct quotation between the Indonesian rupiah and the Chinese yuan, expanding the use of local currencies in bilateral trade, as well as facilitating trade and investment of the two countries.”
The PBOC also said eight commercial banks and branches in China and 12 commercial banks and branches in Indonesia have been selected as the Appointed Cross Currency Dealers, or ACCDs, to undertake the transactions in the two currencies-the Indonesian rupiah and the Chinese yuan-under the new framework.
Bank Indonesia said the framework includes “the relaxation of relevant rules and regulations” to enhance the usage of local currencies.
This, observers said, will mark a further step toward the internationalization of the Chinese yuan, which will promote trade and direct investment in the region. mAnalysts said the initiative for bilateral local currency settlement will enhance the stability of the Indonesian rupiah and the Chinese yuan by reducing dependence on other foreign currencies.
In 2018, the two central banks extended the bilateral local currency swap agreement for the promotion of trade and investment, as well as to sustain stability of domestic financial markets.
That agreement, which swapped 200 billion yuan with 440 trillion rupiah, will expire by November, and monetary authorities of the two countries can continually extend the agreement if they achieve a consensus, according to a notice from the PBOC.
– The Daily Mail-Global Times News exchange item
