BEIJING: China and Malaysia have agreed to set up a clearing bank on Renminbi (RMB)-Ringgit business deals in Kuala Lumpur, a pact that will bolster the latter’s position as a gateway for RMB flows in Southeast Asia.
In essence, the clearing bank will mean reduced cost and ease of doing business between the two countries as payments can be made in RMB, and thus doing away with the current need to convert payments into the US dollar first.
The clearing bank is consistent with Malaysia and China’s efforts to achieve US$160 billion worth of trade by 2017. Last year, the two-way figure stood at US$106 billion.
Prime Minister Datuk Seri Najib Razak disclosed the landmark initiative today after meeting Chinese President Xi Jinping and Prime Minister Li Keqiang on the sidelines of the Asia Pacific Economic Cooperation (APEC) leaders summit here.
“I am very pleased that the MoU (memorandum of understanding) on the RMB clearing and settlement arrangements between our two central banks, the People’s Bank of China and Bank Negara Malaysia has been signed to strengthen the financial and economic relationship,” Najib said.
He said the designated clearing bank will be a catalyst to support rapid growth in bilateral trade, investment and financial flows between Malaysia and China.
“I am confident that Malaysian financial institutions will be able to utilise this advantage to pursue greater use of RMB to facilitate greater regional trade and investment in their extensive network in Asean, thus strengthening Malaysia’s position as a gateway for RMB flows in the Asean region,” Najib said.
He pointed that the establishment of the RMB clearing bank had stemmed from his discussion with Xi in China last May to commemorate the 40th anniversary of Malaysia-China relationship.
Going forward, Najib said, the designated clearing bank will become a strategic component in Malaysia’s financial system and infrastructure.
This will allow for a significant pooling of RMB liquidity to meet the financing needs of the local financial institutions and businesses.-NST