Daily Management Review

China Will Collaborate With Asian Economies To Increase Use Of Local Currencies For Trade And Investment


China Will Collaborate With Asian Economies To Increase Use Of Local Currencies For Trade And Investment
China wants to increase the use of local currencies for trade and investment and for this purpose Beijing plans to approach to work closely with its trading partners in Asia, said Yi Gang, the governor of the central bank of the country. This is a part of the strategy of China to further bolster regional economic resilience. 
At an event of the G20 grouping, Yi said that the region's financial safety net against external shocks has been strengthened by the advancements made by emerging economies of Asia in recent years through the use of local currencies for trading and investments in each other’s economies.
"Emerging markets should improve their resilience," Yi said at the event hosted by Indonesia which was conducted virtually.  "This is where regional co-operation has a key role to play," Yi added.
He said that bilateral currency swaps within the regional grouping of ASEAN – including China, Japan, and South Korea, have reached $380 billion.
China’s central bank the People's Bank of China (PBOC), last month expanded a bilateral currency swap agreement in Bank Indonesia for three years with the aim of further strengthening financial cooperation between the two countries and fostering further mutual investments. 
"Central banks from advanced economies should continue to enhance market communications," Yi added. He said that this would aid in mitigating the spillover effect at a time when the emerging economies are facing greater risks because of the economic impact of the Covid-19 pandemic.
According to a section of economists, emerging economies of Asia, including China, and in other regions could be threatened with large capital outflows after the United States Federal Reserve begins to tighten its fiscal policy and raise interest rates. 
According to a survey of economists conducted by the news agency Reuters, it is expected that the US Fed will start to tighten its fiscal policy in March this year, starting with a hike in interest rate by 25 basis points. However, the poll also revealed that an increasing number of economists and experts are calling the Fed to start a more aggressive tightening policy and increase the interest rate by 50 basis points to tackle record inflation being experienced by the country currently.
Yi added that the PBOC will continue with its accommodative monetary policy and keep it flexible since the authorities believe that the country’s economic growth will return to its expected rate in 2022.