Beijing, Kathmandu Sign Local Currency Expansion Deal
Beijing, Kathmandu Sign Local Currency Expansion Deal
The apex, central banks of Nepal and China have just signed an agreement to expand the use of local currencies as per a statement from the People’s Bank of China on its website on 23rd December 2014, Tuesday.
When Neighbours Become Friends
As per the deal, the currencies of the two countries can now be employed for settlement during cross border trade and ordinary trade as well as commercial activities too. The deal for the local currency expansion was signed between the governor of the People’s Bank of China, Zhou Xiaochuan and visiting counterpart Yuba Raj Khatiwada of the NRB or Nepal Rashtriya Bank. The deal aims at facilitation of bilateral trade and investment, as per the statement.
The 2 sides have also signed an MoU on anti-money laundering and cooperation for anti-terrorist activities. China and Nepal have signed this agreement for enhancing investment ties between the two nations as well.
Good Neighbours, Excellent Trade
As per the agreement, the two nations will use local currencies namely the Yuan and the Nepal rupee for settling cross border trade as well as ordinary trade activities. NRB’s Deputy Governor Gopal Kafle has indicated that the currency swap deal was on the agenda of the governor’s visit.
Earlier during the month of June, 2013, the two central banks have invested in the MoU paving the way for Nepalese investment in Chinese securities. The President of the Nepal Trans Himalayan Border Commerce Association, Nilkantha Chaulagain has indicated that the currency swap deal was a positive move for cross border trade and indicated its expansion could cover all the levels of trade.“Currently, we have to pay for our purchases in China in US dollars, and allowing the use of Nepali currency in China will be very helpful to us,” he was also quoted as having said.
Trade between the two nations has grown by leaps and bounds in recent times with the northern neighbour becoming the second largest trading partner of Nepal. During the first 4 months of 2014, bilateral trade rose to INR 33.62 billion according to the Nepal Rashtriya Bank.
China has made the biggest foreign investment commitment in the previous fiscal as per the Department of Industry. Chinese investors have pledged a sum of INR 7.31 billion for Nepal.
About PBC
The People’s Bank of China has been established on December 1st, 1948. This bank was formed following the consolidation of the Huabei Bank, Beihai Bank and Xibei Farmer Bank. In the month of September 1983, the State Council has aimed for the PBC as a central bank. The Law of the People’s Republic of China on the People’s Bank of China was adopted by the third plenum of the 8th National People’s Congress in the month of March 1995.
Socialist market economic system has evolved in China to a high degree of complexity. The PBC is an apex bank which plays a vital role in the macroeconomic management of China. The amended Law of the People’s Republic of China on the People’s Bank of China was adopted in 2003. The PBC drafts and enforces relevant laws, rules as well as regulations pertaining to its functions. Monetary policy has to be implemented as per law following formulation. The apex bank also issues the Chinese currency the Renminbi and administers its circulation.
Apart from this, the regulation of financial markets such as the inter-bank lending market, the inter-bank bond market as well as the foreign exchange market and the gold market is also carried out by this bank. It monitors anti-money laundering work, credit reporting, participation in international financial activities and regulates financial business operations in accordance with relevant rules.
The PBC is also responsible for the formulation and implementation of the monetary policy and prevention as well as resolution of financial risks plus maintenance of financial stability.
