The Chinese yuan is being used more extensively in dealings between Cambodian and Chinese firms to the detriment of the United States dollar, according to the Cambodian Central Bank.
Speaking yesterday at a forum on the internationalisation of the Chinese yuan, also known as ‘renminbi’ (RMB), Sum Sannisith, deputy governor of the National Bank of Cambodia (NBC), said there has been a 10 percent jump in the use of the Chinese currency in trade exchanges between Cambodia and China.
“The RMB plays an increasingly important role in cross-border trade and investment in line with enhanced cooperation between Asean and China,” Mr Sannisith said.
“As an Asean nation, and due to our close relation with China, Cambodia benefits from the internationalisation of the RMB,” he said.
Bolstering the use of the Chinese currency for cross-border settlements reduces the risks associated with fluctuations in the value of the US dollar, said Khou Vuthy, deputy director general for central banking at NBC.
Moreover, accepting yuan is part of a growing trend that favours the use of local currencies in Asia, he added.
“Since launching trade settlements in yuan, we have seen that the use of the RMB in settlements has increased. This is because it is now easier for Chinese investors and companies to do business with local firms,” Mr Vuthy said yesterday.
Last year, Cambodia imported $5.3 billion in Chinese goods, while it exported about $758 million to the East Asian giant, according to NBC.
The yuan is being used in a growing portion of those exchanges. Its use within Cambodia is also rising due to the increasing number of Chinese visitors making purchases in their home currency.
Chinese tourists visiting the country have increased remarkably, standing at the top of the list, with 1.2 million Chinese holidaymakers in 2017.
Additionally, Chinese investors injecting capital into local projects and Cambodia’s growing reliance on China for funding has also aided the spike in the use of the currency.
China continues to be the Kingdom’s top investor, with $6.1 billion injected into Cambodia last year as FDI. Most of this investment went into energy production projects and the garment, agriculture and banking industries, NBC said.
The NBC allows certain banks and financial institutions to operate in yuan. The Bank of China (BOC) and the Industrial and Commercial Bank of China (ICBC) are allowed to conduct operations in yuan and can act as clearing facilities.
13 other commercial banks are allowed to transact in RMB, enabling importers of Chinese products to secure more loans and allowing people paid in yuan to open bank accounts with local institutions.
Chinese tech businesses have also contributed to the rise in the use of the Chinese currency. Payment gateways like Alipay and WeChat Pay are widely used by tourists and residents in Cambodia. China’s UnionPay, the largest supplier of payment cards, is also broadly used in the Kingdom, Mr Sannisith explained.