PUTRAJAYA: Prime Minister Datuk Seri Najib Tun Razak launched the Bank of China as the renminbi clearing bank in Kuala Lumpur to facilitate and reduce the cost of doing business here.
Malaysia is the second country after Singapore in ASEAN to establish a renminbi clearing bank with China.
Najib said the landmark establishment of the renminbi clearing bank was the result of discussions between Chinese President Xi Jinping and himself in May this year.
“This marks another important milestone in the bilateral relationship between Malaysia and China and this fruitful collaboration would facilitate more trade in renminbi and boost Malaysia’s status as ASEAN financial hub,” he said at the launch of the clearing bank here yesterday.
Najib said the Bank of China, currently the seventh largest bank in the world by assets, would provide Malaysia direct access to the Chinese financial markets and new avenues to source as well invest surplus renminbi funds at competitive rates.
“The new clearing bank, a critical financial initiative, will enhance our ties still further. It will support increased bilateral trade and investment, promote the use of local currency settlement and bring mutual benefit for everyone in the region,” he said.
He said the clearing bank would reduce liquity risk, encourage the growth of premium financial services in both countries, besides further promoting the facilitation of trade and investment.
“Currently, the renminbi foreign exchange now stands at RMB3.5 billion a day. It is increasingly recognised as a major global trade settlement currency. This establishment could not come at a more opportunate time,” he said.
Prior to the agreement, conversion of the ringgit into yuan would need to be first converted into the US dollar and then thereafter to the renminbi.
With a clearing house in Malaysia, the ringgit can be directly converted to yuan, hence reducing the cost of transaction.
As Malaysia chairs ASEAN this year, Najib said, stable and internationally-recognised currencies would be crucial to facilitate the accelerated trade and investment activities in order to establish the ASEAN Economic Community.
“Since ASEAN is one of China’s largest trading partners, the renminbi has a key role to play and we anticipate Malaysia becoming a major offshore renminbi clearing centre to facilitate direct trade settlement within the region.
“This could drastically lower transaction costs and benefit both China and ASEAN,” he said.
On the historic Malaysia-China relationship, Najib said, the good business cooperation progressed further in the projects undertaken by China in the country including the establishment of the China-Malaysia Qinzhou Industrial Park and the Malaysia-China Kuantan Industrial Park.
Last year, he said, total approved foreign direct investments from China in the manufacturing sector in Malaysia totalled RM4.8 bilion.
The renminbi clearing house is the latest in a series of moves that both countries have undertaken to enhance trade that has grown more than 10-fold since 2000 to exceed US$100 billion (RM332.85 billion) in 2013.
China is Malaysia’s largest trading partner and Malaysia is China’s largest trading partner in ASEAN.
In May last year, during the 40th anniversary of the establishment of diplomatic relations between the two countries, Malaysia and China agreed to work towards the realisation of bilateral trade target of US$160 billion (RM532.56 billion) by 2017.