Settling all bilateral trade between China and Pakistan in yuan is not a new facility. It has been there since December 2011 when a currency swap arrangement was signed between the two countries.
However, our traders had seemingly continued to feel more comfortable with the dollar because the PML-N government had kept a tight grip on the value of the rupee vis-à-vis dollar, never allowing it to tumble to its actual worth until the fag end of its five-year term, while on the other hand the yuan had looked to these traders relatively unstable as it was creeping up from Rs14 to Rs17 to a yuan.
China on its part has been signing similar arrangements with several countries in order to internationalise the yuan and prepare for an era when China’s currency could rival the US dollar as a global currency.
Indeed, if China switched from the greenback to the yuan to pay its oil-sector suppliers, it would eliminate annual dollar demand in such contracts by $876 billion, leading to historic depreciation of the dollar. READ MORE
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