With trade between Cambodia and China steadily growing, banking sector players have put out a call to increase facilities for businesses using Chinese currency to pay for imports and exports.
Speaking at a workshop organised by the Bank of China, Chen Chang Jiang, CEO at the Bank of China in Phnom Penh, said the use of the yuan in business transactions had progressed steadily since the bank was appointed by the National Bank of Cambodia (NBC) to be a clearing bank for local and cross-border yuan transactions.
“The internationalisation of the yuan will not only help China increasingly integrate with the world, but can provide more channels for cross-border investments, trade and financial dealing,” Chen said.
He added that the Bank of China’s branch in Phnom Penh had settled 35 million yuan, the equivalent of $5.5 million, in cross-border remittance settlements during the first six months of the year.
The Bank of China is one of two approved yuan clearing banks in Cambodia, along with Industrial and Commercial Bank of China (ICBC).
A number of other local financial institutions offer businesses yuan settlement services.
Bilateral trade between Cambodia and China topped $3.7 billion last year and is expected to reach $5 billion by 2017, according to a Bank of China report.
E Zhihuan, head of the economics and strategic planning department at the Bank of China (Hong Kong), said fast-growing trade relations between Cambodia and China have laid a solid foundation for further development of yuan-based transactions and built up a sizable yuan liquidity pool in Cambodia.
“Cambodian firms will benefit from the use of the yuan in settlements, especially in the case of Cambodian exports to China, where they will receive payments in a stable currency with low volatility,” he said.
“On the flip side, with imports from China, making payments in yuan could increase a traders bargaining power and help negotiate for better prices.”
Independent economist Srey Chanthy said the use of the yuan for settlements in trade with China presents no problem for Cambodia’s economy, and will provide better coordination of business activities. But its use for daily transactions could undermine the banking system.
“If we use the yuan, like we do the dollar, there will be problems. It will be complicated for people, who may lose confidence in the banking system and they could stop depositing money in banks,” he said.
He continued that for trade settlements, using the yuan would protect traders from potential losses due to fluctuations in the dollar exchange rate.
Bun Mony, chairman of the Cambodia Microfinance Association, said that the dollar and euro continue to remain the primary currencies for settling payments in Cambodia, with the yuan still being used on only small scale.
“If China wants to promote yuan in business transactions they need to release more yuan in the market,” he said. “If they release more and increase business activity in yuan, I believe it will grow.”
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