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Beijing to Urge Neighbours to Trade in Local Currency

Progress by emerging Asian nations in using local currencies in trade and investment has strengthened the regional financial safety net, the PBOC chief said


Foreign exchange reserves have dwindled across the region over the last two months. Photo: Reuters
Foreign exchange reserves have dwindled across the region over the last two months. Photo: Reuters

 

China will work with Asian countries to beef up use of local currencies in trade and investment, Yi Gang, the governor of the central bank, said on Wednesday, as part of plans to strengthen regional economic resilience.

Progress in recent years by emerging Asian nations in using local currencies in trade and investment has strengthened the region’s financial safety net against external shocks, Yi told an event of the G20 grouping.

“Emerging markets should improve their resilience,” Yi said by video at the event hosted by Indonesia. “This is where regional cooperation has a key role to play.”

Bilateral currency swaps among the ASEAN regional grouping, China, Japan and South Korea have reached $380 billion, he said.

Last month, the People’s Bank of China extended a bilateral currency swap pact with Bank Indonesia for three years to deepen financial cooperation and promote investment.

“Central banks from advanced economies should continue to enhance market communications,” Yi added, as this would help mitigate the spillover effect at a time of greater risks to emerging economies from the Covid-19 pandemic.

Economists believe China and other emerging economies could face the risk of capital outflows once the US Federal Reserve starts to tighten policy.

The Fed is expected to kick off its tightening cycle in March, with an interest rate rise of 25 basis points, but a growing minority say it will opt for a more aggressive half-point move to tamp down inflation.

China will keep its accommodative monetary policy flexible, as economic growth is likely to return to its potential rate this year, Yi added.

 

  • Reuters, with additional editing by George Russell

 

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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