Signing of the Memorandum of Understanding between The People’s Bank of China and Bank Indonesia on the Cooperation to Promote the Use of Local Curren

[艹艹艹]

Signing of the Memorandum of Understanding between The People’s Bank of China and Bank Indonesia on the Cooperation to Promote the Use of Local Currencies
date of last update sep. 30, 2020

The Governor of The People’s Bank of China, Mr. Yi Gang and the Governor of Bank Indonesia, Mr. Perry Warjiyo signed the Memorandum of Understanding for the Establishment of a Framework for Cooperation to Promote the Settlement of Current Account Transactions and Direct Investment in Local Currencies.

The People’s Bank of China and Bank Indonesia reached mutual agreement on initiatives relating to the promotion of the use of local currencies for trade and direct investment settlement, which includes, among others, promotion of the direct exchange rate quotation and interbank trading between the Chinese Yuan and the Indonesian Rupiah. This cooperation will be enhanced through information sharing and periodical discussions between Chinese and Indonesian authorities.

This collaboration marks a key milestone in strengthening bilateral financial cooperation between China and Indonesia. The authorities believe that it will positively contribute to encourage the use of local currencies for settlement of trade and direct investment between the two countries.

 

[艹艹艹]

China central bank launches currency settlement cooperation framework with Bank Indonesia
SEPTEMBER 06, 2021

BEIJING - China's central bank said on Monday that it has launched a currency settlement cooperation framework with Bank Indonesia from Sept 6 to deepen trade links and facilitate the direct settlement of the yuan and the Indonesian currency.

The People's Bank of China said the move was in line with a memorandum of understanding signed between the monetary authorities on Sept 30, 2020.

 

[REhorror]

Dollar hegemony is near its end.

 

[nufix]

Signing of the Memorandum of Understanding between The People’s Bank of China and Bank Indonesia on the Cooperation to Promote the Use of Local Currencies
date of last update sep. 30, 2020

The Governor of The People’s Bank of China, Mr. Yi Gang and the Governor of Bank Indonesia, Mr. Perry Warjiyo signed the Memorandum of Understanding for the Establishment of a Framework for Cooperation to Promote the Settlement of Current Account Transactions and Direct Investment in Local Currencies.

The People’s Bank of China and Bank Indonesia reached mutual agreement on initiatives relating to the promotion of the use of local currencies for trade and direct investment settlement, which includes, among others, promotion of the direct exchange rate quotation and interbank trading between the Chinese Yuan and the Indonesian Rupiah. This cooperation will be enhanced through information sharing and periodical discussions between Chinese and Indonesian authorities.

This collaboration marks a key milestone in strengthening bilateral financial cooperation between China and Indonesia. The authorities believe that it will positively contribute to encourage the use of local currencies for settlement of trade and direct investment between the two countries.

It just simply makes more sense to use Yuan/Rupiah for bilateral trade and settlements as there will only be one cost of FX. Converting from Rupiah to Dollar, then Dollar to Yuan would just create unnecessary costs for both parties while indirectly benefiting dollars.

 

[Indos]

Indonesia-China Bilateral Transactions Now Use Rupiah, Yuan
BY :WHISNU BAGUS PRASETYO, JAYANTY NADA SHOFA
SEPTEMBER 06, 2021

Jakarta. The framework of the local currency settlement, or LCS, between Indonesia and China officially came into effect, thus increasing the use of rupiah or yuan in their bilateral transactions while lessening both nations' dependence on the dollar.

Bank Indonesia and its Chinese counterpart People’s Bank of China inked the memorandum of understanding on the LCS framework last September.

The framework encompasses the use of direct exchange rate quotation, as well as relaxation of certain regulations in the foreign exchange transactions between rupiah and yuan.

“This partnership is part of Bank Indonesia’s continuous efforts to promote a wider use of local currencies in the settlement of trade transactions and direct investments with various partner countries,” the Indonesian central bank wrote in their official statement on Monday.

According to BI, the LCS expansion will support rupiah's stability by lowering reliance on certain currencies in the domestic foreign exchange market.

Thanks to the LCS, businesses can enjoy lower conversion costs, and now have an option for trade financing and direct investment in local currencies. The LCS offers alternative hedging instruments in local currencies. It also diversifies currency exposure in cross-border transaction settlements.

China is one of Indonesia's biggest trading partners, with bilateral trade expected to reach $79 billion this year. In the first quarter alone, the bilateral trade was valued at $25 billion.

BI and PBC have selected qualified banks in their respective countries as the appointed cross-currency dealers (ACCD).

The appointed banks are deemed to have the ability to facilitate rupiah and yuan transactions in accordance with the agreed LCS framework, according to BI.

Criteria for the ACCDs include sufficient level of resilience and soundness and good relations with the banks in the partner country, among others.

Among the chosen ACCDs in Indonesia are Bank Central Asia, Bank of China (Hongkong), Bank China Construction Bank Indonesia, Bank Danamon Indonesia, Bank ICBC Indonesia.

Also on the list are Bank Mandiri, Bank Maybank Indonesia, Bank Negara Indonesia, Bank OCBC NISP, Bank Permata, Bank Rakyat Indonesia, and Bank UOB Indonesia.

The appointed banks in China include Agriculture Bank of China, Bank of China, Bank of Ningbo, Bank Mandiri Shanghai Branch, China Construction Bank, Industrial and Commercial Bank of China, Maybank Shanghai Branch.

And last but not least is the United Overseas Bank (China) Limited.
Prior to China, Indonesia has already established LCS frameworks with Japan, Malaysia, Thailand.

Indonesia-China Bilateral Transactions Now Use Rupiah, Yuan

Bank Indonesia and its Chinese counterpart officially kicked off the implementation of the local currency settlement framework.

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