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Push for trade in yuan increasing

Slowly but steadily, demand to do cross-border business in Chinese yuan is pushing its way into one of Asia’s dollar-dominated strongholds.

As China continues to liberalise the yuan – or at least hint at when some capital controls could be lifted – Cambodian businesses that import from China have seen increased interest from their Chinese counterparts to settle in the yuan.

“Suppliers in China are asking to settle in yuan, but they’re not insisting yet,” said Tom Kimson, chief executive at Dynamic Scientific Co Ltd, a Cambodian company that supplies pharmaceuticals and laboratory equipment. The company gets its agro-chemical products from China.

“In reality, you can’t get away from this when doing business in the region.”

The pace at which the yuan has taken a spot in international trade has been “surprising”, according to ANZ’s head of greater China economic research, Li-Gang Liu.

ANZ Royal launched a yuan remittance service this month, and a handful of other Cambodian banks have either put similar products on the market this year, or say they will launch the invoicing option soon, he said.

The yuan – also called the renminbi, abbreviated RMB – accounted for 4 per cent of transaction value in international trade as of April, according to Li-Gang Liu, who spoke yesterday at a forum on offshore yuan trading and remittance in Phnom Penh.

The currency is still far behind the US dollar and the euro, which represent 84 per cent and 7 per cent of global transactions respectively. But the speed at which the yuan has moved from a strictly domestic currency in China in 2010 to an invoicing currency in the region has taken economists by surprise.

“Given developments in the European Union, it’s believed that the RMB will be the No 2 [transaction currency] in the not-so-distant future,” Li-Gang Liu said.

The implications for Cambodia are not concrete, but economists and insiders agreed that the yuan would replace the dollar in cross-border trade between China and Cambodia.

“Recent reports showed that we are continuing to lose money on the exchange rate,” Louis Xiang, general manager for ZTE Southeast Asia, said yesterday, adding that the Chinese technology firm did almost all of its business in dollars.

“In the future, our company will try to do business in yuan ... Policy encourages this, and we can avoid losing on exchange [fluctuations].” The Chinese government has given tax incentives to companies that settle accounts in yuan.

In late March, China and Cambodia pledged to double bilateral trade to US$5 billion by 2017. The jump in trade, however, would largely be Chinese imports, experts told the Post earlier this year.

“That deficit would have to be funded by the banking sector” if banks were to invoice two-way trade between the countries, Grant Knuckey, ANZ Royal chief executive, said yesterday.

During the past year, several banks in Cambodia have come forward with plans to market yuan remittance and invoicing products, among them ANZ Royal, Cambodia Public Bank, Maruhan Japan Bank and Union Commercial Bank.

A fully convertible yuan could come sooner than expected. China efforts to establish Shanghai as a global yuan trading hub should help lift controls, Li-Gang Liu said.

In February, the People’s Bank of China outlined a piecemeal plan for loosening controls on the yuan. Although foreign access to capital markets was given a five-year timeline, the central bank was mum on when the yuan would drop its government-managed float.

To contact the reporter on this story: Don Weinland at



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