The National Bank of Cambodia and the People’s Bank of China yesterday officially launched the yuan-riel exchange rate at the China-Asean expo in Nanning.
For in depth analysis of Cambodian Business, visit Capital Cambodia
“The yuan-riel exchange rate proves the importance of economic and financial ties between Cambodia and China,” said Sum Saniseth, vice governor of the NBC.
“China also has a similar exchange rate with Malaysia and Thailand and this shows the importance it places with Asean,” added Mr Saniseth.
Mr Saniseth said the yuan-riel exchange rate was useful for Cambodia because China is the country’s first source of foreign investment flow and Chinese tourists are also ranked first among foreign tourists.
“Bilateral trade has more than doubled in the past five years,” he said.
The 14th China-Asean Expo currently being held in Nanning is titled “Co-Building the 21st Century Maritime Silk Road, Promoting Regional Economic Integration through Tourism”.
The four-day event has attracted 2,709 exhibitors, up 1.5 per cent from the previous year, while the number of buyers is expected to exceed 10,000, including about 4,000 international buyers, according to the expo secretariat.
Mr Saniseth said that the launch of the exchange rate would also help reduce any business transaction risk between both countries.
“The NBC does support the establishment of bilateral exchange rates through the use of national currencies in trade and economic activities.
“This helps reduce the risk of exchange rate fluctuations to enhance the effectiveness and safety of cash settlements,” he added.
Charles Van, president of the Association of Banking of Cambodia, told Khmer Times recently that he welcomed the move because the yuan-riel exchange rate would help the balance of payments between both countries.
“I think it is important for our two countries because we have more and more business and investment engagement with others – so it is necessary to have this exchange rate which is really common in the world,” he said.
“At the same time, we also applaud that our local currency is to be circulated at the international level which is in our target of promoting the wide use of riel in the future,” he added.
Chea Serey, director-general of the NBC said previously that the bank also wants to promote trade settlements between the two countries in local currencies.
She said Cambodian businesses importing goods from China can pay in yuan and Chinese businesses importing goods from Cambodia can pay in riel to the Cambodian exporters.
“This is part of China promoting the internationalisation of the yuan. For Cambodia, this is a good opportunity as well, because trade between the two countries is growing very rapidly.”
She said 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.
China is a major donor and investor in Cambodia, pumping in $2 billion in grants, loans and direct assistance and with FDI reaching $10 billion since 1990, according to official data.