China has proposed to Pakistan to set up RMB Capital Circulation System to promote trade and transactions in the Chinese currency, the media reported.
To clarify, renminbi (RMB) is the official currency of China and one of the world’s reserve currencies. It is also the eighth most traded currency in the world.
According to details, the government asked the finance ministry and the central bank to review the proposal of the Chinese authorities and take practical steps. It is expected that formal talks between the two countries will take place soon.
Moreover, for the promotion of the trade in the Chinese currency, a pilot project encompassing the introduction of the ‘RMB pricing’ should be introduced in the first phase. In the second phase, the RMB settlement and financing policies should be focused on.
The exchange rate for the currencies of both countries should be set in the China Foreign Exchange Trading System (CFETS) and in authorised banks declared as cross-border currency markets in China and Pakistan, as per reports.
Pakistani rupee in free fall?
Last week, the Pakistani rupee surpassed the anticipated level of Rs200 in the open market against the US dollar after shedding Rs2.5 on Wednesday.
Meanwhile, in the interbank market, the local currency continued to be on a slippery slope, and with a fresh decline of Rs3.87, or 1.34% in a single day, it plunged to yet another historic low of Rs198.39 against the greenback despite suspected intervention from the central bank.
The currency hit a record low of Rs188.66 on May 10. It then plunged to Rs190.02 on May 11, fell over Rs191 on May 12, reached Rs192.52 on May 13, sank below Rs194 on May 16, and down to Rs195.74 on May 17.
However, the US dollar on Friday plummeted by Rs2 against the Pakistani currency, sliding down to Rs200 in the interbank market.