ISLAMABAD – As China’s Belt and Road Initiative (BRI) has boosted theglobal use of the yuan, Pakistan, which is a part of the project, has beenincreasingly encouraged to use the Chinese currency in its businessdealings with Beijing instead of doing trade in the US dollar, the GlobalTimes reported.
Despite the yuan skyrocketing in popularity in Southeast Asia, relativelystringent foreign exchange policies in some BRI markets are restricting thecurrency’s internationalization in the short term.
“On the positive side, the growing pace of yuan use in BRI countries hasbeen faster than the yuan’s overall usage in the world in recent years. Thetrend is particularly evident in some Southeast Asian countrieslike Singapore”, Zhou Yu, director of the Research Centre for InternationalFinance at the Shanghai Academy of Social Sciences, was cited as saying.
Pakistan and China agreed to ditch the greenback and start trading in yuanin bilateral relations in November 2018.
“The agreement is part of practical steps being taken [by China] to supportour [foreign] currency [reserves]”, Pakistani Information Minister FawadChaudhry said at the time.
The central State Bank of Pakistan immediately declared the yuan anapproved foreign exchange for all purposes in the country.
China has increasingly been using the yuan, which was included in theSpecial Drawing Right (SDR) basket in 2016 alongside the US dollar, theJapanese yen, the euro, and the British pound, in bilateral trade with anumber of countries, including Russia.
In addition, Beijing has been on a gold-buying spree for several months nowas part of the country’s strategy to move away from the US dollar.
China’s decision to boost its gold reserves after a two-year hiatuscoincided with similar efforts by world central banks to shift awayfrom the greenback.
According to the People’s Bank of China, it increased its reserves by 10tonnes in February, following the acquisition of 11.8 tonnes in January and9.95 tonnes in December, thus bringing overall holdings to 1,874 tonnes, or60.26 million ounces. In January, China had the sixth largest gold reservesin the world, slightly lagging behind Russia. -Sputnik