The National Bank of Cambodia (NBC) and the People’s Bank of China (PBC) have 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.
Last month, the yuan-riel exchange rate was officially launched during the China-Asean Expo in Nanning, an initiative 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, speaking during a conference on the promotion of the yuan and the riel in cross-border trade, said increasing the use of the yuan in trade settlements between the two countries will also increase the use of Cambodia’s currency.
“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.
Seventeen banks in Cambodia allow for transactions in yuan, while 11 more will enable the use of the Chinese currency in the near future, according to a representative of the NBC.
“At present, China and Cambodia are at a critical stage of development, facing the same task of deepening reform and optimising the industrial structure,” said Pan Hongsheng, the deputy secretary-general at the PBC’s Monetary Policy Committee.
“During the process, financial cooperation and, more specifically, bilateral local currency cooperation, can help pave the way for our common road to prosperity and development,” he said.
Lim Heng, the 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,” he said.
Neav Chanthana, the deputy governor of the NBC, said about 14 percent of trade between Cambodia and China was conducted in yuan.
“Promoting the use of the yuan and the riel in trade will bolster trade, tourism, investment and economic growth in general,” Mrs Chanthana said.
Since 1998, China has been Cambodia’s biggest trade partner. From 2004 to 2016, imports from China to Cambodia amounted to $23 billion.
In 2016, the volume of imports from China to Cambodia reached $4.5 billion, an increase of 15 percent year-on-year. During that same period, China’s imports of Cambodian products were valued at $609 million.