KARACHI: China’s proposal to use yuan as trading currency in bilateral trade with Pakistan has been widely welcomed by the business community. However, there are fears that this move would mostly benefit China in its exports to Pakistan.
On Monday, Minister for Planning and Development Ahsan Iqbal had said that the government is considering the Chinese proposal to use renminbi (RMB) instead of the US dollar for payments in bilateral trade.
The government has recently rejected a Chinese proposal to allow Chinese yuan as currency in Gwadar city, mostly developed by the Chinese, as the offer encouraged doubts about China’s intentions for Pakistan.
However, the new move to use RMB for bilateral trade has been generally welcomed by importers, while exporters are not sure if it could boost their exports.
“The government takes decision unilaterally without considering the other stakeholders like traders and industrialists,” said Javed Bilwani Chairman SITE Association of Industries and a fashion apparel exporter.
He said that recently duty was imposed on certain imports to cut the trade deficit, however, several raw materials were also included in these imports and the government is trying to resolve the issue.
“We were not consulted at the time of imposing import duty and we are not being consulted over the Chinese proposal of making RMB the trading currency. No calculation is available to guage the impact of this move on our businesses,” he said.
However, he said that overall there seems no loss in accepting the Chinese proposal on the outset.
He said the imports from China are much higher than the official figures and the Chinese customs is not ready to cooperate with Pakistan in disclosing the size of under invoicing from China.
While many traders have supported the RMB proposal, some have also cited their concerns that most of the benefits of this move would go to China.
“Smooth trading with China is possible after RMB payments. We pay dollars; a commission is paid on exchange through New York. This will stop if RMB is used,” said Ahmed Vohra, who imports chemicals from China.
He said the opening of Letters of Credit (LC) would be easier since Bank of China is already operating in Pakistan. However, some traders and industrialist have expressed fear that China would soon exploit the situation in its favour.
Currency experts see no big change if the yuan is used for payments between the two countries.
“Ultimately, we will have to arrange a foreign currency yuan instead of the dollar. It will only benefit China which has absolute domination in bilateral trade.
Published in Dawn, December 20th, 2017