Can the Bangladesh economy afford trade in local currencies?

[UKBengali]

Now if chinese or indians are happy to take payment in Taka, sure lets get on with it, but we can not accept anything but USD for our exports.

Why would BD not accept for say Chinese rembini for it's exports as China would accept its own currency for goods and services that BD imports from it.

BD needs to be more aggresivce to reduce it's dependence on dollars.

 

[mb444]

Why would BD not accept for say Chinese rembini for it's exports as China would accept its own currency for goods and services that BD imports from it.

BD needs to be more aggresivce to reduce it's dependence on dollars.

Simple reason is it is not convertible. If you are a BD bank it is a hassle. You need to wait for a LC to be raised in yuan to offset any yuan holding, why bother when USD is universally and instantaneously convertable.

BB has had the facility for Yuan deposits for quite a few years but no BD bank has bothered for this single reason.

This is a dead end for a while yet. What we need is get into a currency swap agreement. That is easy and the safest route and gives BB maximum flexibility.

Lets hope BD gets into SCO and they set up a currency swap deal between the members. Win win for everyone and it will overall reduce the dollar dependence.

 

[mmr]

Simple reason is it is not convertible. If you are a BD bank it is a hassle. You need to wait for a LC to be raised in yuan to offset any yuan holding, why bother when USD is universally and instantaneously convertable.

BB has had the facility for Yuan deposits for quite a few years but no BD bank has bothered for this single reason.

This is a dead end for a while yet. What we need is get into a currency swap agreement. That is easy and the safest route and gives BB maximum flexibility.

Lets hope BD gets into SCO and they set up a currency swap deal between the members. Win win for everyone and it will overall reduce the dollar dependence.

Getting in to Sco is long shot by that time bd forex will go to shit. It’s already below 30 billion.

What bd need is look for way to stop under over invoice by BD business community and let market decide the dollar rate to stop Hundi.

 

[mb444]

Getting in to Sco is long shot by that time bd forex will go to shit. It’s already below 30 billion.

What bd need is look for way to stop under over invoice by BD business community and let market decide the dollar rate to stop Hundi.

Over invoicing is a major issue. One way to cut it down is for GoB to buy cotton itself and sell it to RMG sector much like we do with rice, oil etc. Wont fix everything but could be a start.

 

[UKBengali]

Simple reason is it is not convertible. If you are a BD bank it is a hassle. You need to wait for a LC to be raised in yuan to offset any yuan holding, why bother when USD is universally and instantaneously convertable.

When BD imports 20 billion US dollars from China every year, I do not think that wait will be too long.

This is just BD government and financial insitutions being lazy.

BD needs to accept as much rembini as it can get from countries that have substantial holdings like Russia etc.

 

[MH.Yang]

Why would BD not accept for say Chinese rembini for it's exports as China would accept its own currency for goods and services that BD imports from it.

BD needs to be more aggresivce to reduce it's dependence on dollars.

Simple reason is it is not convertible. If you are a BD bank it is a hassle. You need to wait for a LC to be raised in yuan to offset any yuan holding, why bother when USD is universally and instantaneously convertable.

BB has had the facility for Yuan deposits for quite a few years but no BD bank has bothered for this single reason.

This is a dead end for a while yet. What we need is get into a currency swap agreement. That is easy and the safest route and gives BB maximum flexibility.

Lets hope BD gets into SCO and they set up a currency swap deal between the members. Win win for everyone and it will overall reduce the dollar dependence.

Getting in to Sco is long shot by that time bd forex will go to shit. It’s already below 30 billion.

What bd need is look for way to stop under over invoice by BD business community and let market decide the dollar rate to stop Hundi.

You can use CNY to freely exchange USD, but you cannot use USD to freely exchange CNY.

Because China's monetary policy is not only to maintain the independence of monetary policy, but also to maintain the stability of the currency. Therefore, the Chinese government will not allow too much uncontrolled CNY capital.

Because according to Mondale's impossible trinity law, only by limiting CNY's capital liquidity can we guarantee the independence of monetary policy and the stability of exchange rate.

Impossible trinity - Wikipedia

en.m.wikipedia.org

 

[HydraChess]

Now if chinese or indians are happy to take payment in Taka, sure lets get on with it, but we can not accept anything but USD for our exports.

You are not exporting that much to India and China, so that part wont matter. It will actually incentivise India and China to buy more from B'desh because Taka they get from their exports will be usable in BD only.

 

[mb444]

When BD imports 20 billion US dollars from China every year, I do not think that wait will be too long.

This is just BD government and financial insitutions being lazy.

BD needs to accept as much rembini as it can get from countries that have substantial holdings like Russia etc.

You are mixing things up.... are you suggesting we accept Yuan over dollar for transactions with countries other than china?

So you want non chinese countries to have yuan reserves readily at hand or convert to yuan to pay BD. Russia might be in a tight spot now but this situation does not exist in any other country. The chinese themselves want dollar because she also imports lots of things. I do not believe any country in the world has much of a reserve of Yuan.

No dude...never going to happen. BD banks are not lazy, political dictate are not going to be followed through on when it makes no logical sense.

You can use CNY to freely exchange USD, but you cannot use USD to freely exchange CNY.

Because China's monetary policy is not only to maintain the independence of monetary policy, but also to maintain the stability of the currency. Therefore, the Chinese government will not allow too much uncontrolled CNY capital.

Because according to Mondale's impossible trinity law, only by limiting CNY's capital liquidity can we guarantee the independence of monetary policy and the stability of exchange rate.

Impossible trinity - Wikipedia

en.m.wikipedia.org

You are absolutely correct, yuan is not free floating and for very good reasons.

For BD i do hope currency swap mechanism is set up that will benefit both countries.

 

[UKBengali]

You are mixing things up.... are you suggesting we accept Yuan over dollar for transactions with countries other than china?

So you want non chinese countries to have yuan reserves readily at hand or convert to yuan to pay BD. Russia might be in a tight spot now but this situation does not exist in any other country. The chinese themselves want dollar because she also imports lots of things. I do not believe any country in the world has much of a reserve of Yuan.

No dude...never going to happen. BD banks are not lazy, political dictate are not going to be followed through on when it makes no logical sense.

BD must accept Yuan reserves where ithe importer does not want or cannot pay in dollars.

If it means that Russia pays BD 1 billion US dollars equivalent of Yuan then so be it. BD will need less than 1 month to use all these Yuan up from it's imports from China.

My comment was made more at your insistence that BD only demands dollars for its exports.

As the decade progresses then we are likely to see more and more countries start accumulating more Yuan reserves and so BD should make sure that it is ready to start dealing with the Chinese currency.

China is the world's largest trading nation and it's position will just strengthen with time and BD must be proactive and not reactive, as the Yuan starts becoming a major currency with which to exchange goods and services.

PS - China will accept Yuan for imports and China exports far more than it imports. They would only have a problem with this if everyone insisted on just paying in Yuan.
Juts lasth month China had a surplus of 100 billion US dollars.

 

[mb444]

BD must accept Yuan reserves where ithe importer does not want or cannot pay in dollars.

If it means that Russia pays BD 1 billion US dollars equivalent of Yuan then so be it. BD will need less than 1 month to use all these Yuan up from it's imports from China.

My comment was made more at your insistence that BD only demands dollars for its exports.

As the decade progresses then we are likely to see more and more countries start accumulating more Yuan reserves and so BD should make sure that it is ready to start dealing with the Chinese currency.

China is the world's largest trading nation and it's position will just strengthen with time and BD must be proactive and not reactive, as the Yuan starts becoming a major currency with which to exchange goods and services.

PS - China will accept Yuan for imports and China exports far more than it imports. They would only have a problem with this if everyone insisted on just paying in Yuan.
Juts lasth month China had a surplus of 100 billion US dollars.

No you are not getting the basic point. Yuan is neither a free floating currency nor is the flow of yuan unrestricted.

Dollar is, thats why you have huge quantities of dollar around the world. Fed does not enforce currency control to enable easy convertibility just like other hard currencies such as Euro or GBP.

Yuan and dollar is not the same thing. Chinese government does not and has never allowed yuan to proliferate internationally as reserves by anyone.

You can not simply hold yuan of any quantity you want, the circulation is not there. China have done this to protect itself and its economy strategically against the west. Yuan is pegged to the dollar and china maintains strict currency control.

Dollar and Yuan are apples and oranges dude. There is no such thing as a BD importer unable to pay in dollars and have Yuan. First the BD importer will pay in taka, it is BB or an affiliated BD banks that converts it to dollar or potentially Yuan if it has any. No BD bank has any interest in holding Yuan for the reasons I have elaborated earlier.