Cambodia was asked to quote prices in the Chinese currency for trade with companies in China’s Guangdong province.
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The request was made by Guangdong’s vice-governor Ouyang Weimin, who met with Cambodian Commerce Minister Pan Sorasak last week during his official visit to China.
Mr Ouyang explained that, as a matter of policy, the yuan is used in cross-border trade with China and said Cambodian companies should quote prices in the Chinese currency instead of the US dollar.
“Guangdong province will soon establish a trade centre to display products from Southeast Asia, including Cambodia. It is a perfect opportunity for Cambodian companies to showcase their products and introduce them to Chinese consumers.
“The centre will help promote Cambodian products in the Chinese market,” Mr Ouyang said.
Last year, the National Bank of Cambodia (NBC) and the People’s Bank of China (PBC) urged investors and traders to use the yuan and the riel in transactions involving both nations. The request is in line with recent moves to strengthen economic and political ties between China and Cambodia.
Moreover, the yuan-riel exchange rate was officially launched in September during the China-Asean Expo in Nanning, Guangxi province. The initiative is widely expected to bolster economic relations between both countries, improving efficiency and security and saving costs when exchanging the currencies.
NBC director general Chea Serey said last October that increasing the use of the yuan in trade settlements between the two countries will also increase the use of the Cambodian riel.
“We are encouraging Chinese and Cambodian companies to trade in yuan and riel as to avoid risks associated with currency exchanges,” Ms Serey said.
She said that Cambodian businesses importing goods from China should pay in yuan and Chinese businesses importing goods from Cambodia should use riel.
According to Ms Serey, the use of a different currency, like the US dollar, as an intermediary for trade settlements could pose an exchange rate risk for investors from both countries.
Chan Sophal, director of the Center for Policy Studies (CPS), told Khmer Times that the use of the yuan in cross-border trade with Cambodia makes transactions more convenient.
He said the use of the US dollar can be problematic, as the currency is more volatile.
“The use of the yuan will reduce our reliance on the US dollar, and it will help reduce the risks associated with the depreciation of the dollar,” Mr Sophal said.
He said the NBC should try to facilitate the use of the yuan, but that, ultimately, it should allow traders to choose what currency to use.
Lim Heng, vice-president of the Cambodia Chamber of Commerce (CCC), said it was important to settle cross-border transactions with China in yuan or riel.
“Cambodia should increase reserves of foreign currencies and reduce its dependency on the US dollar,” Mr Heng said.
“When Chinese businesspeople accept the riel, the Cambodian private sector will also accept the yuan. We will push and encourage our members to use the yuan in cross-border trade and investment.”
Cambodia’s exports to China, the second largest economy in the world, rose sharply during the first 11 months of 2017, by as much as 18 percent compared with the same period in 2016.
Cambodian shipments to the Chinese market consisted mostly of agricultural products, mostly rice, cassava, cashew nuts, semi-processed palm oil and rubber.
Imports from China were mainly cars, motorcycles, construction materials, fabric for garment factories, cigarettes and fertilizers.