Economic cooperation with Myanmar to boom
▶ Financial ties expected to get boost from Xi’s state visit
Financial cooperation between China and Myanmar is set to boom as bilateral ties will be further lifted during Chinese President Xi Jinping’s upcoming state visit to the South Asian nation, said local business representatives, adding that a closer financial bond with China is urgently needed by Myanmar and could keep its economy afloat.
Industry insiders said a rising financial connection between the two neighboring economies will make bilateral trade more efficient and promote the yuan’s internationalization, which will further break the hegemony of the US dollar in the region.
As China remains Myanmar’s main trading partner and main source of foreign investment, and Myanmar urgently needs Chinese capital to keep its economy afloat, financial cooperation between the two Asian economies under the Belt and Road Initiative (BRI) bound to flourish, He Biqing, head of the Yangon subsidiary of Industrial and Commercial Bank of China (ICBC), told the Global Times on Tuesday.
China has long been Myanmar’s largest trading partner and important source of foreign investment. From January to September in 2019, bilateral trade reached $13.54 billion, a year-on-year increase of 17.9 percent. Meanwhile, Chinese companies invested $150 million in Myanmar.
In January 2019, Myanmar added both the yuan and the yen as permissible settlement currencies for its international payments and transfers.
In response, ICBC launched the Myanmar-China Financial Express last year, a quotation mechanism that pegs the yuan against the kyat, aiming to meet the soaring demand from Myanmar.
“We saw a hike in the use of the yuan in settlements and clearing in Myanmar last year,” He noted.
As President Xi’s upcoming visit will expand and deepen bilateral trade in sectors including seafood exports, energy, basic infrastructure, finance and other labor-intensive sectors, financial ties between the two are set to boom and the yuan will be used in settlements and clearing more frequently.
Xi is set to pay a state visit to the country on Friday and Saturday.
“In the past, the massive trade and investment transactions were settled by a thirdparty currency, [like the dollar], which is less efficient. It also increases exchange rate risks and the costs of currency conversion,” He explained.
He noted that using the yuan as a clearing currency could insulate companies in both countries from rate fluctuations, making cross-border capital flows more smoothly.
“As China-invested BRI projects speed up and Myanmar’s financial industry gradually opens up, financing needs will rise. Bilateral financial cooperation will also lead to cooperation in other areas that will benefit living standards and contribute to Myanmar’s social development,” he said.