The National Bank of Cambodia (NBC) and the Central Bank of the Republic of China are to launch a yuan-riel exchange rate in September to facilitate interbank transactions, in response to the rise in flow of Chinese investors, trade and tourists between the nations.
The NBC said the exchange rate will cut the number of times international trade is done in US dollars. “The exchange rate is intended to provide an alternative to Chinese banking institutions, investors, businesspeople, or Chinese tourists so they can get riel in China’s interbank market,” said the NBC. “This will promote the riel at the international level.”
The bank said the initiative will give another option for Cambodia’s international trade in terms of balance of payments rather than only using US dollars.
In Channy, president and group managing director of ACLEDA Bank, one of the largest locally owned banks, said direct engagement with China would greatly improve the country’s trade and investment.
“We see that the investment flow from China and our trade exchange is really big so the launch of the exchange rate will give another alternative for balance of payments in yuan – which we normally do in US dollars for international trade, which is time-consuming,” he said. “But now we can make it in real-time. This will also help to promote the use of our local currency at the international level.”
Charles Van, president of the Association of Banks in Cambodia, welcomed the move saying that the cooperation is proving that the yuan and riel will be widely used in terms of balance of payments between both countries.
“I think it is important for our two countries because we have more and more business and investment engagements with each other. So it is necessary to have this exchange rate,” he said. “At the same time, we also applaud that our local currency is to be circulated at the international level which is our strategy for promoting the wider use of the riel.”
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.”
Serey added that 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.
This article was originally published in the Khmer Times.