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Cambodia: Rice deals in riel and yuan?
The Cambodia Rice Federation (CRF) and the National Bank of Cambodia (NBC) discussed ways to use the Chinese Yuan and the riel in rice exports between China and Cambodia.
CRF vice president Chan Sokheang told Khmer Times the CRF also talked with the representative of the NBC to promote the local currency for domestic consumption and transactions. He said all the transactions with the rice millers and farmers will use riel.
All rice exporters may soon have an alternative choice of payment either in US dollars (the international currency of trade) or yuan. However, Sokheang said there were barriers to using the yuan for cross-border transactions previously, therefore, the discussions with the NBC were to resolve previous issues.
“The government as well as the National Bank of Cambodia are encouraging transactions in either Chinese yuan or Khmer riel, but there are some conditions for which the use of both currencies is not easy, especially regarding the exchange rate and the banks which play the role for the cash settlement. Therefore, we proposed these issues to the NBC for resolution,” Sokheang added. “After there is a solution, we will start piloting it,” he added.
China also has strict capital controls.
“If we can trade with Chinese yuan and Khmer riel, we will benefit from the exchange rate risk. At present, exports of milled rice to China have been conducted in US dollars, but when the buyers sold the products in the Chinese market they get Chinese yuan. Then they exchange the Chinese yuan to US dollars to pay the Cambodia sides. Therefore, there is a loss on the exchange rate,” he added.
Sokheang said that for the first five months of the year Cambodia exported milled rice to China at a total value of $71 million. Therefore, the use of yuan and riel for the cross-border transactions will be beneficial for both traders – Cambodia and China – and they also enable the expansion of Cambodian milled rice to the Chinese market.
Long Vibunrith, deputy director of the Exchange Management Department at the National Bank of Cambodia, thanked the CRF for supporting the mechanism to conduct transactions in yuan for rice exports – a request from the Central Bank of China.
Both parties agreed on the proposal to set up a memorandum of understanding (MoU) to begin transactions in yuan and riel at the meeting attended by the Chinese Central Bank, the Cambodia Central Bank (NBC) and commercial banks.
Vibunrith said that there might be an MoU signing ceremony during the Asia-Europe Summit in November, when the leaders of Cambodia, Hun Sen, and China, Xi Jinping, meet each other.
The Cambodia Rice Federation has also suggested to the NBC to fix the exchange rate between riel and the yuan one month ahead of enacting the deals because it is the main barrier for foreign trade.
In 2017, the NBC and the People’s Bank of China (PBC) urged investors and traders to use the yuan and the riel in transactions involving both nations. The yuan-riel exchange rate was officially launched in September 2017 during the China-Asean Expo in Nanning, Guangxi province. The initiative is widely expected to bolster economic relations between both countries, improve efficiency and security and save costs when exchanging currencies.
The Cambodia central bank also allows certain banks and financial institutions to operate in yuan.
Source: https://www.khmertimeskh.com/50735451/rice-deals-in-riel-and-yuan/