China, Pakistan and Japan local Currency Trade Agreements: De-Dollarization of Economy


By Dr Shahid Qureshi: –

Pakistan announced an agreement with China to use Chinese currency for bilateral trade to end the burden of relying on U.S. dollars. This agreement, reached during the Pakistani premier’s Imran Khan’s current visit to China, would help Pakistan get rid of the dollar burden in $15 billion of bilateral trade, said the government spokesman on 5 November 2018.

The decision of both Pakistan and China to trade in local currencies is a great step towards autonomy and transparent economic system away from corrupt Wall Street financial terrorism.

Russia is also working on the de-dollarization model and promoting trade in local currencies. I reported on 21st April 2018, that: ‘Turkey Moves 220 tons Gold worth $25.3 billion from US Federal Reserves’. That could be the reason few months later Turkish Lira was attacked in a financial terrorist attack.

Turkey Moves 220 tons Gold worth $25.3 billion from US Federal Reserves

On 26 October 2018, China has signed $30 billion currency swap pact with Japan. China and Japan pledged to forge closer ties as both countries stood together at an “historic turning point”, signing a broad range of agreements including a $30 billion currency swap pact, amid rising trade tensions with Washington.

The arrangement, which takes effect on Friday and lasts until October 25, 2021, will allow the exchange of local currencies between the two central banks for up to 200 billion yuan or 3.4 trillion yen ($30 billion), the Bank of Japan said.

The move to Chinese currency would also help both countries replace the U.S. dollar for their transactions and investment in the multi-billion-dollar China-Pakistan Economic Corridor (CPEC).

This June, the State Bank of Pakistan formally allowed both public and private enterprises to use Chinese currency for bilateral trade and investment activities.

The $54-billion CPEC project aims to connect China’s strategically important north western Xinxiang province to the Pakistani port of Gwadar, Baluchistan through a network of roads, railways, and pipelines to transport cargo, oil, and gas.

The economic corridor would not only provide China cheaper access to Africa and the Mideast but also earn Pakistan billions of dollars for providing transit facilities to the world’s second-largest economy.

Under current foreign exchange regulations, the Chinese yuan (CNY) is an approved foreign currency for denominating foreign currency transactions in Pakistan, like other international currencies such as the U.S. dollar and euro.

The State Bank of Pakistan has already put in place the required regulatory framework facilitating the use of the yuan in trade and investment transactions such as the opening of letters of credit and availing financing facilities. Well to be more practical Pakistani national bank need open more branches in China and same need to be done by the Chinese to avoid delays and keep smooth flow of currency and trade.

Japanese firms including big auto companies like Toyota hope to see normalised ties with China so they can compete with US and European rivals, while Beijing expects Tokyo’s endorsement of its ambitious Belt and Road programme, an initiative that Chinese President Xi Jinping hopes will further boost trade and transport links with other countries.

China – Japan ‘Historic turning point’

Abe said that bilateral relations with China are at an “historic turning point” and that he expects new possibilities in industries such as infrastructure, logistics, healthcare and finance.

He has held “frank” discussions with Chinese Premier Li Keqiang since arriving in Beijing on Thursday and is expected to meet with Xi later on Friday in the first full-scale Sino-Japanese summit since 2011.

Efforts in advancing China-Japan ties should “persevere unremittingly to prevent the appearance of new twists and turns” so that previous efforts did not go to waste, said Li at a joint briefing with Abe.

“The Chinese side is willing to work with the Japanese side to return to a normal track, and maintain the stable, sustained and healthy development of bilateral relations,” he said, adding that he had held candid discussions with Abe since his arrival on matters of mutual concerns. They reached consensus, Li said, that safeguarding long-term healthy and stable China-Japan ties was in accordance with the interests of both countries and the region and the world.

“From competition to co-existence, Japan and China bilateral relations have entered a new phase. Hand in hand with Premier Li, I would like to advance our ties forward,” Abe said at the briefing. Ahead of the briefing, China and Japan signed an agreement to prepare yearly plans for talks, dialogues and exchanges, as well as a pact to step up cooperation in innovation.

They also agreed to boost cooperation in the securities markets including the listing of exchange-trade funds (ETFs) and facilitate smoother customs clearance.

Both sides signed a currency swap agreement of up to $30.29 billion (3.4 trillion yen), effective until 2021. They also inked a deal towards establishing a yuan clearing bank.

Li said both sides had agreed that as major countries, China and Japan should uphold free trade and accelerate talks on the Regional Comprehensive Economic Partnership (RCEP) and on a China-Japan-Korea trade zone.

RCEP is a free trade agreement proposed by China with Southeast Asia and various countries on the Pacific Rim including Japan. The move to boost economic ties came as China and the United States slap tit-for-tat tariffs on each other in recent months. Japan is at risk as it exports to China manufacturing equipment and electronic parts, which are used to make finished goods for the United States and other markets.

In the real sense it is China which is keeping US afloat otherwise it would have been drowned in the drains and sewerage of Wall Street’s corruption. Any wise businessman will keep his customers alive and well enough to buy its products because he a ‘dead’ customer is not good for business. In UK due to the consumer and service-based economy, insurance companies are scaring people and asking them to buy funeral insurance. That is extreme of corrupt mindset.

(Dr Shahid Qureshi is senior analyst with BBC and chief editor of The London Post. He writes on security, terrorism and foreign policy. He also appears as analyst on Al-Jazeera, Press TV, MBC, Kazak TV (Kazakhstan), LBC Radio London. He was also international election observer for Kazakhstan 2015 and 2016 and Pakistan 2002. He has written a famous book “War on Terror and Siege of Pakistan” published in 2009. He wrote his MA thesis on ‘Political Thought of Imam Khomeini’ and visited Tehran University. He is PhD in ‘Political Psychology’ also studied Law at a British University. He also speaks at Cambridge University and visiting professor in Hebe University in China)

Views expressed are not of The London Post.