Dealing in yuan to counter the dollar crisis

There is a possibility of increasing exports to the Chinese market due to duty-free access to all garment products made in Bangladesh. In the meantime, the central bank has allowed the country's banks to open accounts in the Chinese currency yuan. If these opportunities are exploited, China can become a big export market for Bangladesh like the United States and Europe - think the exporters and economic analysts of the government. For this reason, they have urged to take a long-range plan at the government-private level.

Due to the acute dollar crisis in recent times, the issue of using alternative currencies in foreign trade came into discussion. The currencies of 5 countries of the world have been recognized as 'High Value Currencies' by the International Monetary Fund or IMF. The Chinese Yuan is one of them. The yuan was recognized in the IMF's currency basket in 2016. Since then, the yuan has become stronger than ever as a currency in the IMF's review.

Meanwhile, China is the top importing country of Bangladesh. Bangladesh imports goods worth 14 to 15 billion dollars from China every year. But on the contrary Bangladesh's export to China has not yet reached one billion dollars. Bangladesh has always used dollars for import and export.

Former banker and observer Nurul Amin said, Yuan is the currency that Bangladesh and China can use for trade with each other. Trading with China in yuan means you can bypass the dollar crisis, which both countries will accept. However, it is doubtful whether transactions can be made quickly through yuan

there is A big reason for this is how the value of the yuan is determined. Bangladesh's foreign exchange comes from exports and remittances. Both come in dollars. Moreover, since Bangladesh's export to China is less than 1 billion dollars, the supply of yuan will not be high. Nurul Amin said, if our exports were more, then the yuan would have accumulated more. However, it is possible to trade with China through currency exchange. In that case, traders will see how the value of the money and the value of the yuan go.

Fazlul Haque, a leading knitwear exporter in Bangladesh and president of the Bangladesh Knitwear Manufacturers Association, said it is good to want to trade with China in yuan. Because China is also comfortable doing transactions in yuan. But there is doubt whether the matter can be done effectively. He said, the biggest issue for exporters is how many dollars they are earning. They always calculate it in terms of dollars. Exporters may also ask for payment in yuan. In this case there may be complications.

In the face of continued dollar crisis, the central bank allowed the country's banks to open accounts in the Chinese currency yuan last Thursday. In a related circular issued by Bangladesh Bank, it is said that authorized dealer branches of banks can open bank accounts in yuan currency with related banks in China. Opportunities for banks to settle cross-border payments in yuan will increase.

Earlier, authorized dealer banks could maintain a foreign currency clearing account with Bangladesh Bank in Chinese currency. Bangladesh Bank has opened cross-border payment settlement facilities in yuan at a time when central banks around the world are increasing their yuan reserves. Earlier, China proposed an agreement between Bangladesh Bank and China's central bank People's Bank of China regarding currency exchange. In a letter last August, the Chinese Embassy in Dhaka said that this currency exchange agreement will help reduce the risk of foreign currency exchange rates. At the same time, the transaction cost of foreign currency will also be reduced.

China is the world's second largest economy after the United States. The country is becoming a major influence in the global economy and financial markets. It is known that China contributed more than 30 percent to the global economic growth in the last decade. At a time when China's economic power is at its peak, the country wants its currency to take the place of the US dollar as the main medium of international transactions. And with this, central banks around the world are also increasing the amount of yuan in their foreign currency reserves (forex reserves).

China has become one of the major sources of funding for Bangladesh. Through this, the country has been placed in the list of top development partners of Bangladesh at the time discussed. After independence, the amount of aid from China to Bangladesh was almost zero. There, the amount of foreign aid from China has increased to about 11.2 percent in the fiscal year 2020-21. Through this, China became Bangladesh's sixth largest bilateral development partner, this growth in funding can be said to be huge. Direct investment by Chinese companies in related projects stood at $15 billion last year, a quarter of which was in yuan. China now settles 15 percent of its foreign trade in its own currency. This rate was 11 percent in 2015 as well.