Dawn News

The State Bank of Pakistan — File Photo
The State Bank of Pakistan — File Photo

BEIJING: Pakistan will join a growing list of central banks that will invest in China's interbank market as the world's second-largest economy opens its capital markets.

The People's Bank of China announced on Monday that it had signed an agreement with the State Bank of Pakistan to help Pakistan invest in its local debt market, without providing details about the size of the investment programme.

China has allowed foreign central banks to invest in its domestic interbank bond market since 2010 as part of efforts to widen investment avenues for foreign yuan asset holders and promote the international use of the Chinese currency.

China and Pakistan signed a three-year currency swap deal worth 10 billion yuan ($1.60 billion) in December 2011 and companies in the two countries are encouraged to accept export and import bills in Chinese yuan.

The central banks of Japan, South Korea, Singapore, Thailand, Hong Kong and Indonesia are among those who invest in China's bonds onshore.

Besides central banks, China also allows yuan clearing banks in Hong Kong and Macau and foreign banks that help settle cross-boarder trade in yuan to invest in its interbank bond markets.

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Comments (4) Closed

Oct 23, 2012 08:19am
where are chines to ans this question are they philanthropists?
Oct 22, 2012 12:41pm
Your country hardly has some US15 billion in reserves. Most of the trade is in favor of China to whom you have to pay.So tell me how are you going to get this Chinese currency.You have a currency swap deal.Yes.But they will only buy enough from you to pay for what they import from you.China is a nation of businessmen not philanthropists .
Oct 22, 2012 10:11pm
raika45 Its very easy. There is something called softloans. These loans are issued by banks based on long term and at very low interest Pakistan State Bank can get loan to get it yuan reserve going even though we still have a huge reseve of yuan keeping in mind pakistan and china relationship. Dollar becomes obselete in this scenerio. Secondly, the chinese are investing in mega projects in pakistan. There currency will be accepted in pakistan as is dollar, euros, dinars, and riyals as examples. Third, soon oil and gas will be shipped from the port of gawader, the transit fees can be delivered in yuan not dollars. :). Making it easier for chinese companies to trade with oil rich sanction imposed countries.
Oct 22, 2012 11:23am
A very good move.Extends flexibility and more choices to State Bank of Pakistan to optimize returns/liquidity. Farooq Shaikh