A report by the Bank of Thailand notes that China and Thailand are exploring the possibility of settling bilateral trade transactions in local currencies. The aim of this initiative is to reduce reliance on the U.S. dollar and strengthen financial cooperation between the two countries. Using the renminbi and the Thai baht for trade payments can lower transaction costs, improve efficiency, and promote trade liquidity. The report also highlighted the potential benefits of establishing a cross-border payment system and currency swap arrangements between China and Thailand.<\/p>\n
In 2021, the two countries renewed their bilateral currency swap agreement between the renminbi and the baht, allowing for the exchange of the two currencies over a five-year period. The World Bank\u2019s *Economic Report on East Asia and the Pacific* notes that Thailand\u2019s trade and tourism sectors are highly dependent on China and are expected to benefit significantly from China\u2019s reopening policies.<\/p>\n
In recent years, trade volume between China and Thailand has continued to grow, reaching a total value of $7.9 billion over the past five years. Nevertheless, the majority of transactions are still settled in U.S. dollars, which exposes both countries to additional exchange rate risks and transaction costs. However, due to the lack of financing mechanisms based on domestic capital markets, this overreliance on the U.S. dollar leaves both countries highly vulnerable to shocks from changes in global financial conditions and liquidity.<\/p>\n
Over the past few years, the majority of outstanding foreign debt securities in Southeast Asia\u2019s emerging markets have been denominated in U.S. dollars. Furthermore, international trade involving Southeast Asia\u2014whether imports or intraregional trade\u2014is primarily invoiced in U.S. dollars.<\/p>\n
To stimulate bilateral trade and investment, some banks have begun exploring the feasibility of using the renminbi and the baht as direct settlement currencies.<\/p>\n
The Industrial and Commercial Bank of China (ICBC) is one of the banks actively promoting trade settlement in renminbi and Thai baht; the bank has branches in both countries. ICBC believes that using the renminbi and Thai baht as payment currencies can reduce foreign exchange costs, improve cash flow efficiency, and offset the risk of exchange rate fluctuations. The bank also offers a diverse range of financial products and services\u2014including cross-border remittances, trade finance, foreign exchange hedging, and cash management\u2014to support trade settlement in renminbi and Thai baht.<\/p>\n
Bank of Ayudhya is another financial institution focused on RMB-baht trade settlement. As one of Thailand\u2019s largest commercial banks, it operates a branch in Shanghai. Bank of Ayudhya has long collaborated with the Industrial and Commercial Bank of China (ICBC) and other Chinese banks to provide RMB-baht trade settlement services to its clients. In addition, Bank of Ayudhya provides information and advice on the regulatory framework and market conditions for RMB-baht trade settlement, as well as other cross-border business opportunities between China and Thailand.<\/p>\n
The benefits of trade settlement in RMB and Thai baht extend beyond banks and their customers to encompass the broader economic and strategic ties between China and Thailand. By settling trade in their respective currencies, China and Thailand can strengthen financial cooperation, deepen economic integration, and enhance mutual trust. Trade settlement in renminbi and Thai baht also helps advance the internationalization of the renminbi and the regionalization of the Thai baht, thereby fostering a more diversified and resilient global financial system.<\/p>\n
At the Association of Southeast Asian Nations (ASEAN) meeting of finance ministers and central bank governors held in Indonesia, shifting financial transactions away from reliance on the U.S. dollar, the euro, the Japanese yen, and the British pound toward settlement in local currencies emerged as a key agenda item. At the meeting, participants discussed the possibility of reducing reliance on major currencies through the Local Currency Trading (LCT) initiative. This initiative is an extension of the earlier Local Currency Settlement (LCS) program, which has already begun to be implemented among ASEAN member states.<\/p>\n
This means that the Association of Southeast Asian Nations\u2019 cross-border digital payment system will be further expanded and will allow ASEAN countries to settle trade transactions in their own currencies.<\/p>","protected":false},"excerpt":{"rendered":"
A report by the Bank of Thailand notes that China and Thailand are exploring the possibility of settling bilateral trade transactions in local currencies. The aim of this initiative is to reduce reliance on the U.S. dollar and strengthen financial cooperation between the two countries. Using the renminbi and the Thai baht for trade payments can lower transaction costs, improve efficiency, and promote trade liquidity. The report also highlighted the potential benefits of establishing a cross-border payment system and currency swap arrangements between China and Thailand.<\/p>","protected":false},"author":2,"featured_media":4014,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4015","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acpt":{"meta":[]},"yoast_head":"\n