What’s new: The central banks of China and Indonesia launched a cooperation framework on Monday to promote the use of local currencies for bilateral trade and investment, according to official statements.
“It is conducive to promoting the direct quotation between the Indonesian Rupiah and the Chinese Yuan, expanding the use of local currencies in bilateral trade as well as facilitating trade and investment of the two countries,” the People’s Bank of China said in a statement.
Five Chinese commercial banks — including Industrial and Commercial Bank of China Ltd. (ICBC) and Bank of China Ltd. (BoC) — and several Southeast Asian banks have been chosen to undertake transactions under the initiative.
The context: The framework is based on a memorandum of understanding signed by the two central banks in September last year. It marks progress in China’s efforts to promote yuan internationalization.
On Monday, both ICBC (link in Chinese) and BoC (link in Chinese) completed their first local-currency settlement deals under the initiative for clients. Using the yuan and rupiah for bilateral trade settlement can reduce exchange-rate risks and exchange costs for Chinese and Indian enterprises, BoC said in a statement.
Related: Four Things to Know About China’s Cross-Border Yuan Clearing System
Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)
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