The National Bank of Cambodia (NBC) is looking into joining the RMB Cross-border Interbank Payment System (CIPS) to provide additional international payment options; facilitate and boost trade, investment, tourism between the two countries through yuan-denominated transactions; and to make management of the Chinese currency in the Kingdom’s international reserves easier.
The plan was revealed by NBC assistant governor Chea Serey at a February 13 press conference that comes just two days after Prime Minister Hun Sen’s three-day official visit to Beijing came to a close.
“The NBC has been studying in detail the requirements for CIPS membership since the system was first established in 2015, so the NBC knows what they need, which won’t be new for us. Second, the leaders of the two countries have discussed and agreed this in principle. This will hopefully speed up the process for Cambodia to join CIPS soon,” she said.
Serey remarked that neither SWIFT (Society for Worldwide Interbank Financial Telecommunication) nor CIPS transfers are universally more expensive ways to move funds than the other. “Hence, when there are two options, we profit.”
Anthony Galliano, group CEO of financial services firm Cambodian Investment Management Co Ltd told The Post on February 14 that Beijing “is promoting the use of the RMB [renminbi, or yuan] as a trade currency, asset currency and reserve currency and as part of this initiative has developed the [CIPS]”.
He explained that the RMB “is the fifth most active currency for global payments by value, according to [SWIFT], CIPS was launched in May of 2018, as a financial infrastructure developed in line with international standards, to provide fund clearing and settlement services to domestic and foreign participants in cross-border RMB businesses.
“The main functions of CIPS are remittances and inter-bank settlements related to cross-border RMB settlement in trade in goods and services, direct investment, financing, and fund transfers.
“For Chinese investors in Cambodia, the utilisation of [CIPS] should make it easier to transact and transfer funds in and out of China, and also mitigate currency risk. With the expectation [that] Chinese FDI [foreign direct investment] will regain traction in 2022, the further implementation of CIPS is timely to facilitate cross border RMB settlements,” Galliano said.
During his visit to China, Hun Sen conveyed the Cambodian government’s appreciation for the constant support of Chinese officials, investors, businesspeople and other citizens for economic development, trade and investment in Cambodia.
The premier also invited interested Chinese players to visit the Kingdom and explore the investment opportunities available.
Of note, the Cambodia-China Free Trade Agreement took effect on January 1, 2022, paving the way for the implementation of strategic partnerships as well as initiatives to promote and develop trade, investment and other forms of economic cooperation between the two countries.
The Cambodian and Chinese commerce ministers on February 10 also signed the Action Plan on Trade and Economic Cooperation 2023-2024 on the occasion of Hun Sen’s visit to China.
According to Customs (GDCE), mainland China once again emerged as Cambodia’s largest merchandise trading partner last year, with a volume of $11.686 billion, marking a 4.39 per cent increase over 2021. Chinese exports to the Kingdom accounted for a staggering 89.38 per cent share of this, up 2.87 percentage points on a yearly basis.
This market represented 22.29 per cent of Cambodia’s total international merchandise trade for the year, which was to the tune of $52.425 billion.
Cambodian exports to and imports from mainland China notched up $1.241 billion and $10.446 billion in 2022, respectively, down 17.85 per cent and up 7.86 per cent on a yearly basis. The Chinese mainland was also the largest exporter to Cambodia.
The Kingdom’s trade deficit with mainland China grew by 12.61 per cent, from $8.174 billion in 2021 to $9.205 billion in 2022, GDCE statistics indicate.
According to the NBC, between the August 5, 1994 promulgation of the old Law on Investment and December 31, 2021, Cambodia recorded a cumulative total of 168.8 trillion riel, or $41.0 billion, in FDI, up 11.2 per cent from the nearly 152 trillion riel recorded by end-2020.
The Greater China region – comprising mainland China, Hong Kong, Macau and Taiwan – accounted for the lion’s share at $18.0 billion or 43.9 per cent, followed by South Korea, Singapore, Vietnam, Japan and Malaysia.