(Yicai Global) May 7 -- Bank of China Ltd., one of the country’s big four state-owned banks, has rolled out yuan clearing and settlement services in Karachi, Pakistan, marking a step forward for the currency’s expansion in southern Asia.
The services will help mitigate exchange rate risks in yuan-based transactions for clients in both countries, lowering transaction costs and facilitating trade and investment between the two countries, state-owned news agency Xinhua reported. The State Bank of Pakistan greenlit the plan last month.
China is Pakistan’s most significant trade partner and an important source of inbound investment, said Jameel Ahmad, vice president of the Pakistani central bank. He hopes Bank of China will be able to play a larger role in making the yuan more liquid and diversifying related financial products.
The yuan had a rough 2017 despite China’s plans to open up its financial markets to the outside world. In December, the Chinese currency was used for just 1.61 percent of domestic and cross-border payments, according to data from the Society for Worldwide Interbank Financial Telecommunication, better known as SWIFT.
The Chinese lender will support development of the China-Pakistan Economic Corridor and the Belt and Road Initiative to act as a financial bridge between the two economies, added Wang Yu, China’s consul-general in Karachi. The Belt and Road is a 30- to 40-year plan devised by Chinese President Xi Jinping. It aims to build a vast infrastructure and trade route via a network of rails, roads, pipes and ports across Africa, Asia and Europe.
Bank of China will be the second Chinese institute to run yuan clearing services in Pakistan. Its biggest bank, Industrial and Commercial Bank of China Ltd., began offering them in 2015, two years after Xi unveiled plans for the Belt and Road.
Editor: James Boyton