According to the Memorandum of Understanding Between the People’s Bank of China (PBC) and the State Bank of Pakistan (SBP), the PBC decides to authorize the Industrial and Commercial Bank of China (ICBC) Karachi Branch to act as the RMB clearing bank in Pakistan, PBC announced recently.
A Chinese investor said that Pakistan and China have started the implementation of new financial currency arrangement by converting Chinese currency RMB directly into Pakistani rupee without involving the US dollar and the Chinese investors can save 0.5 million Pakistani rupees on every transaction of Rs. 10 million.
Talking to media, the investor said that the new mechanism has boosted the confidence of Chinese investors and more investors will pour in to invest in Pakistan in general and Gwadar in particular.
The breakthrough has also quashed a sense of reluctance among potential Chinese enterprises interested in pumping fresh investment into CPEC projects. In the past, one of their major concerns was financial damage due to the unpredictable exchange rate in Pakistan.
The bilateral economic and trade cooperation between China and Pakistan is entering a new stage of development, gradually forming cooperation in a wide field, at multiple levels and in all aspects and laying a solid foundation for the development of RMB business in Pakistan.
ICBC Karachi Branch, the only Chinese commercial bank in Pakistan, began cross-border RMB business locally as early as in 2011, with its cross-border RMB settlement reaching RMB 92.9 billion in 2014. Designated by the PBC as the RMB clearing bank in Singapore, Luxembourg, Doha, Toronto, and Bangkok, ICBC has built a global RMB clearing business system. While the RMB transfer efficiency and convenient use are significantly enhanced worldwide, its clearing volume has continued to refresh records.
Located at the intersection of the overseas routes of “One Belt and One Road”, Pakistan is an important country in South Asia. China-Pakistan Economic Corridor can closely combine countries in South Asia, Central Asia, North Africa, and the Gulf through cooperation in economy and energy resources, and form an economic resonance. It can also strengthen the strategic position of Pakistan as a bridge connecting the Eurasian and African continents.
