Pakistan’s central bank has allowed the Chinese yuan to be used for bilateral trade and investment activities, a move which could replace the US dollar for transactions in strategic CPEC projects.

The State Bank of Pakistan (SBP) said that all arrangements for using the Chinese currency for trade and investment were already in place.

The adoption of yuan means that Pakistan and China would be able to replace the US dollar for transactions in the $50-billion China Pakistan Economic Corridor (CPEC) projects.

Ahsan Iqbal, the Minister for Planning and Development, had said on December 19 that the government was considering a Chinese proposal to use renminbi or yuan instead of the US dollar for payments in all bilateral trade.

“The SBP, in the capacity of the policy maker of financial and currency markets, has taken comprehensive policy related measures to ensure that imports, exports and financing transactions can be denominated in yuan,” according to a report in a Pakistani newspaper.

The decision was taken after rejecting a Chinese proposal to allow yuan as legal tender in Gwadar, Balochistan, it said.

The report said that public and private sector enterprises (both of Pakistan and China) were free to choose yuan for bilateral trade and investment activities.

A bank spokesman said the statement on yuan was issued because of too many queries from the media about the use of the currency for bilateral trade.

He said it seemed there was confusion about the use of yuan for bilateral trade, which was needed to be clarified with a detailed statement.

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