The People’s Bank of China and Bank Indonesia announced Monday the launch of a bilateral local currency clearing mechanism based on a local currency settlement framework.
Meanwhile, the Bank of China’s Jakarta branch and the Bank of China were designated as appointed cross currency dealers by the central banks of China and Indonesia to complete the first forex transactions between the Chinese renminbi and the Indonesian rupiah based on direct quotes.
Local currency settlement provides a framework based on the memorandum of understanding signed by the People’s Bank of China and Bank Indonesia last September, which allows dealers to use direct exchange rate quotes that facilitate easier forex transactions between the Indonesian rupiah and the Chinese renminbi
LCS provides a framework based on the memorandum of understanding signed by the People’s Bank of China and Bank Indonesia last September, which allows dealers to use direct exchange rate quotes that facilitate easier forex transactions between the Indonesian rupiah and the Chinese renminbi.
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Bank of China’s Jakarta branch, and the bank’s head office, opened the special purpose non-resident accounts reciprocally, and the channel for transaction settlement and capital settlement based on the LCS guidelines.
In 2020, 15 countries in the Asia-Pacific including China and Indonesia signed the Regional Comprehensive Economic Partnership, which aims to promote economic and trade cooperation within the trading bloc. The move marks a milestone in deepening monetary and financial cooperation between the two central banks and will promote trade and investment facilitation, according to the official website of the People’s Bank of China.
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To further support the operations of LCS, several banks have been commissioned to serve as ACCDs. Those banks in China that have been appointed as ACCDs include the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Ningbo, Bank Mandiri’s Shanghai branch, Maybank’s Shanghai branch, and United Overseas Bank (China) Ltd.
“Local currency settlement has a broad prospect,” said Zhang Chaoyang, president of BOC’s Jakarta branch. “We will continuously support enterprises to use local currencies in cross-border trade and investment, and further contribute to the economic and trade development of China and Indonesia, as well as the internationalization of (the) Chinese renminbi.”