What’s new: The central banks of China and Indonesia on Monday launched a cooperation framework to promote the use of local currencies for bilateral trade settlement and direct investment, official statements said.
“This is conducive to promoting the direct quotation between the Indonesian rupiah and the Chinese yuan, expanding the use of local currencies in bilateral trade and facilitating the trade and investment of the two countries,” the People’s Bank said. from China in a statement. declaration.
Five Chinese commercial banks, including Industrial and Commercial Bank of China Ltd. (ICBC) and Bank of China Ltd. (BOC), and several Indonesian banks have been selected to undertake transactions under the initiative.
The context: The framework is based on a memorandum of understanding signed by the two central banks in September last year. It marks a step forward in China’s efforts to promote the internationalization of the yuan.
Monday both ICBC and BOC announced that they had entered into the first local currency settlement agreements under the initiative for customers in China’s Zhejiang Province and Indonesia. Using the yuan and rupee for bilateral trade settlement can reduce currency risks and exchange costs for Chinese and Indonesian companies, thereby improving the efficiency of capital use, BOC said in a statement. communicated.
Related: Four Things to Know About the Chinese Yuan Cross-Border Clearing System
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