‘If we could use RMB and Taka in bilateral trade, it will reduce transaction cost and mitigate exchange risk’ - Chinese Ambassador Li

[Black_cats]

‘If we could use RMB and Taka in bilateral trade, it will reduce transaction cost and mitigate exchange risk’​

In part three, Ambassador Li discusses how China is expanding access to its markets for Bangladesh and the impact that will have

Ambassador of China to Bangladesh HE Li Jiming Courtesy
Probir Kumar Sarker
August 29, 2022 2:00 PM

Ambassador of China to Bangladesh HE Li Jiming has been gracious enough to grant this extraordinarily open and forthright interview to Probir Kumar Sarker, exclusively for DhakaTribune, which we shall be running in five parts this week. This is the third part.

In Tuesday's section, Ambassador Li discusses how China is expanding access to its markets for Bangladesh and the impact that will have.

How can Bangladesh best benefit from the zero-tariff treatment of 98% of taxable items of Bangladeshi products exported to China from September 1?

The Chinese government has granted duty-free treatment of 97% tariff lines goods originating from Bangladesh exported to China on July 1, 2020 and it has positive effect.

The duty-free treatment of 98% tariff lines goods originating from Bangladesh exported to China will take into effect on September 1, 2022, which will further help boost Bangladesh’s export to China.

Several kinds of basic leather products added into the 98% zero-tariff lines are good news to Bangladeshi exporters in the leather industry, which is an industry with huge potential in Bangladesh. Businessmen in the leather industry have already been focusing on the opportunity provided by the 98% duty-free treatment.

Programs such as “Bangladesh leather and leather products promotion webinar” are undergoing and helping Chinese manufacturing enterprises related to leather products form business relations with Bangladesh’s leather exporters.

To further enhance Bangladesh’s export to China, here comes the main points I would like to share with you.

First, we recommend Bangladesh’s enterprises and exporters participate in China’s International Import Expo (CIIE). Exporters from Bangladesh have been invited to CIIE for four consecutive years. Like previous CIIEs, standard booths for Bangladeshi enterprises will be set up during the 5th CIIE to be held this November.

Bangladeshi enterprises are also welcome to the China-South Asia Exposition in Kunming, which is my hometown. Again, free booths are always provided to our Bangladeshi friends.

And the China Import and Export Fair in Guangzhou (Canton Fair) is another influential fair that is worth participating in.

Second, Bangladesh needs more Chinese market-oriented investment. Be it 97% or 98% duty-free treatment, Bangladesh needs to produce what Chinese market needs in order to boost export.

China’s investment in Bangladesh in 2021 amounted to 1.26 billion dollars and grew by almost threefold. With an accumulated investment of nearly 3 billion, China remains a prominent FDI source for Bangladesh.

If more Chinese investment is attracted to invest here to improve manufacturing industry and industrial structure, Bangladesh will have more diversified exportable products and thereby enjoy more opportunities to grasp Chinese market.

Third, Bangladesh needs to advance studies on bilateral Free Trade Agreement (FTA). In preparation for Bangladesh’s graduation from the LDCs in 2026, we are glad to notice that the Bangladeshi side has shown positive attitude and opened consideration on FTA with trade partners, including China.

It is proper time for our two countries to promote mutual consensus and deepen a joint feasibility study on FTA. FTA between China and Bangladesh would definitely help make preferable arrangement.

Last but not the least, bilateral financial and currency cooperation are strongly recommended to help facilitate trade and economic cooperation. If we could use RMB and Taka in bilateral trade, it will reduce transaction costs and mitigate exchange risk. If we could have currency clearing arrangement between central banks of our two countries, the cross-border payment and settlement of RMB will boost Chinese investment in Bangladesh and China’s import of Bangladeshi goods on an unimaginable scale.

 

[Abu Shaleh Rumi]

We should seriously consider this...

 

[bluesky]

‘If we could use RMB and Taka in bilateral trade, it will reduce transaction cost and mitigate exchange risk’

Iraq's Saddam was ousted and hanged for trying to switch from Dollar to Euro and Pound.

Libya's Gaddafi was ousted and killed for similar reasons.

BD should avoid talking about the dangerous Chinese propositions to switch a part of a BD-China trade from dollars to Chinese RMB. BD exports $10 billion worth of goods to the USA.

The proposition is too dangerous for BD.

 

[UKBengali]

Right now this is not really feasible as BD imports 10 times more from China than it exports to the Chinese.

Hopefully going on towards 2030 as BD exports to China start balancing imports from it then it would be more feasible.

 

[BananaRepublicUK]

Right now this is not really feasible as BD imports 10 times more from China than it exports to the Chinese.

Hopefully going on towards 2030 as BD exports to China start balancing imports from it then it would be more feasible.

Nothing in it for BD at the moment.

 

[Wergeland]

Right now this is not really feasible as BD imports 10 times more from China than it exports to the Chinese.

Hopefully going on towards 2030 as BD exports to China start balancing imports from it then it would be more feasible.

This

Great proposal anyway. Wont happen over the night

 

[mb444]

Right now this is not really feasible as BD imports 10 times more from China than it exports to the Chinese.

Hopefully going on towards 2030 as BD exports to China start balancing imports from it then it would be more feasible.

There is serious merit to this proposal as unlike what some are saying the proposal is not to switch to RMB from Dollar.

The proposal is as follows and is something BD does with many countries without any issue.

BD and the Chinese will sell their produce in local currency but with a provisional dollar value. The transactions will occur via respective countries central banks. The banks will offset the payments between each other and pay the sellers in Taka or RMB. The balance will be payed in Dollars.

China sells lets say $10B worth of goods to BD, whilst we sell $1.5B to china. So rather than us having to fund $10B in dollars we need to fund $8.5B. The flip side is we will get $1.5B less Dollars.

This is fine, it will make Taka stronger and more stable. We need to do this with china, russia and others. We infact already do this via the Asian clearing Union for our trade with India. Unfortunately China is not part of it. This proposal will reduce clearing cost that we are incurring.

On a further note, BD needs to be part of Swift for trade with west and CIPS for trade with China and Russia. Wests monopoly is over and BD needs to proactive and be part of emerging trade blocks from the outset. We lose nothing but increase flexibility.

 

[UKBengali]

There is serious merit to this proposal as unlike what some are saying the proposal is not to switch to RMB from Dollar.

The proposal is as follows and is something BD does with many countries without any issue.

BD and the Chinese will sell their produce in local currency but with a provisional dollar value. The transactions will occur via respective countries central banks. The banks will offset the payments between each other and pay the sellers in Taka or RMB. The balance will be payed in Dollars.

China sells lets say $10B worth of goods to BD, whilst we sell $1.5B to china. So rather than us having to fund $10B in dollars we need to fund $8.5B. The flip side is we will get $1.5B less Dollars.

This is fine, it will make Taka stronger and more stable. We need to do this with china, russia and others. We infact already do this via the Asian clearing Union for our trade with India. Unfortunately China is not part of it. This proposal will reduce clearing cost that we are incurring.

On a further note, BD needs to be part of Swift for trade with west and CIPS for trade with China and Russia. Wests monopoly is over and BD needs to proactive and be part of emerging trade blocks from the outset. We lose nothing but increase flexibility.

I get what you are saying and something is better than nothing as a start.

 

[Bengal71]

There is serious merit to this proposal as unlike what some are saying the proposal is not to switch to RMB from Dollar.

The proposal is as follows and is something BD does with many countries without any issue.

BD and the Chinese will sell their produce in local currency but with a provisional dollar value. The transactions will occur via respective countries central banks. The banks will offset the payments between each other and pay the sellers in Taka or RMB. The balance will be payed in Dollars.

China sells lets say $10B worth of goods to BD, whilst we sell $1.5B to china. So rather than us having to fund $10B in dollars we need to fund $8.5B. The flip side is we will get $1.5B less Dollars.

This is fine, it will make Taka stronger and more stable. We need to do this with china, russia and others. We infact already do this via the Asian clearing Union for our trade with India. Unfortunately China is not part of it. This proposal will reduce clearing cost that we are incurring.

On a further note, BD needs to be part of Swift for trade with west and CIPS for trade with China and Russia. Wests monopoly is over and BD needs to proactive and be part of emerging trade blocks from the outset. We lose nothing but increase flexibility.

Only issue is the US getting upset and punishing us.

 

[bluesky]

Hopefully going on towards 2030 as BD exports to China start balancing imports from it then it would be more feasible.

Please tell us which items BD will export to China in 2030 other than jute. China has opened its market for 8200 items, but BD at your wish is able to export only jute.

On the contrary, China's exports to BD will more increase when it is 2030.

You remain a big-talking guy as if you yourself are our Alga Momen.

 

[mb444]

Only issue is the US getting upset and punishing us.

No real chance of that. The letters of credit will be in dollars and the balance will also be payed in dollars.


You have to remember that whilst trade will nominally occur in dollars the local banks will convert the transactions to Taka and RMB anyway.

All that is happening is that rather than undertaking lots of transactions the clearing banks are cancelling out the value of transactions from each side up to the value of the lesser party. Only processing dollar transactions for the balance that remains.

US wont give a damn and there is not a lot they can do anything about it. Transactions maybe in dollars but that money is not in the US system. We must not be scared about such a minor thing.

We have been using the Asian Clearing Union since the 70s and thats based in Tehran!!

 

[Bengal71]

No real chance of that. The letters of credit will be in dollars and the balance will also be payed in dollars.


You have to remember that whilst trade will nominally occur in dollars the local banks will convert the transactions to Taka and RMB anyway.

All that is happening is that rather than undertaking lots of transactions the clearing banks are cancelling out the value of transactions from each side up to the value of the lesser party. Only processing dollar transactions for the balance that remains.

US wont give a damn and there is not a lot they can do anything about it. Transactions maybe in dollars but that money is not in the US system. We must not be scared about such a minor thing.

We have been using the Asian Clearing Union since the 70s and thats based in Tehran!!

It's not about the technical details of how the transaction happens. The Chinese are trying to convince as many countries as they can to commit to trade in RMB, their intention is to slowly remove the dollar as the reserve currency of the world and replace it with RMB or at least be in parity with dollar. How small an amount we trade in RMB, the US won't care. They will look at the main goal of the Chinese and take action. I am not saying for a minuscule amount they will definitely punish BD but they may punish to make examples to warn others to avert the trend.

We have done without RMB all these years, we can do without for another 5/10 years. Why take risk for a small to no gain?

 

[nahtanbob]

‘If we could use RMB and Taka in bilateral trade, it will reduce transaction cost and mitigate exchange risk’​

In part three, Ambassador Li discusses how China is expanding access to its markets for Bangladesh and the impact that will have

Ambassador of China to Bangladesh HE Li Jiming Courtesy
Probir Kumar Sarker
August 29, 2022 2:00 PM

Ambassador of China to Bangladesh HE Li Jiming has been gracious enough to grant this extraordinarily open and forthright interview to Probir Kumar Sarker, exclusively for DhakaTribune, which we shall be running in five parts this week. This is the third part.

In Tuesday's section, Ambassador Li discusses how China is expanding access to its markets for Bangladesh and the impact that will have.

How can Bangladesh best benefit from the zero-tariff treatment of 98% of taxable items of Bangladeshi products exported to China from September 1?

The Chinese government has granted duty-free treatment of 97% tariff lines goods originating from Bangladesh exported to China on July 1, 2020 and it has positive effect.

The duty-free treatment of 98% tariff lines goods originating from Bangladesh exported to China will take into effect on September 1, 2022, which will further help boost Bangladesh’s export to China.

Several kinds of basic leather products added into the 98% zero-tariff lines are good news to Bangladeshi exporters in the leather industry, which is an industry with huge potential in Bangladesh. Businessmen in the leather industry have already been focusing on the opportunity provided by the 98% duty-free treatment.

Programs such as “Bangladesh leather and leather products promotion webinar” are undergoing and helping Chinese manufacturing enterprises related to leather products form business relations with Bangladesh’s leather exporters.

To further enhance Bangladesh’s export to China, here comes the main points I would like to share with you.

First, we recommend Bangladesh’s enterprises and exporters participate in China’s International Import Expo (CIIE). Exporters from Bangladesh have been invited to CIIE for four consecutive years. Like previous CIIEs, standard booths for Bangladeshi enterprises will be set up during the 5th CIIE to be held this November.

Bangladeshi enterprises are also welcome to the China-South Asia Exposition in Kunming, which is my hometown. Again, free booths are always provided to our Bangladeshi friends.

And the China Import and Export Fair in Guangzhou (Canton Fair) is another influential fair that is worth participating in.

Second, Bangladesh needs more Chinese market-oriented investment. Be it 97% or 98% duty-free treatment, Bangladesh needs to produce what Chinese market needs in order to boost export.

China’s investment in Bangladesh in 2021 amounted to 1.26 billion dollars and grew by almost threefold. With an accumulated investment of nearly 3 billion, China remains a prominent FDI source for Bangladesh.

If more Chinese investment is attracted to invest here to improve manufacturing industry and industrial structure, Bangladesh will have more diversified exportable products and thereby enjoy more opportunities to grasp Chinese market.

Third, Bangladesh needs to advance studies on bilateral Free Trade Agreement (FTA). In preparation for Bangladesh’s graduation from the LDCs in 2026, we are glad to notice that the Bangladeshi side has shown positive attitude and opened consideration on FTA with trade partners, including China.

It is proper time for our two countries to promote mutual consensus and deepen a joint feasibility study on FTA. FTA between China and Bangladesh would definitely help make preferable arrangement.

Last but not the least, bilateral financial and currency cooperation are strongly recommended to help facilitate trade and economic cooperation. If we could use RMB and Taka in bilateral trade, it will reduce transaction costs and mitigate exchange risk. If we could have currency clearing arrangement between central banks of our two countries, the cross-border payment and settlement of RMB will boost Chinese investment in Bangladesh and China’s import of Bangladeshi goods on an unimaginable scale.

barter trade works when both sides purchase the same value of goods

 

[mb444]

It's not about the technical details of how the transaction happens. The Chinese are trying to convince as many countries as they can to commit to trade in RMB, their intention is to slowly remove the dollar as the reserve currency of the world and replace it with RMB or at least be in parity with dollar. How small an amount we trade in RMB, the US won't care. They will look at the main goal of the Chinese and take action. I am not saying for a minuscule amount they will definitely punish BD but they may punish to make examples to warn others to avert the trend.

We have done without RMB all these years, we can do without for another 5/10 years. Why take risk for a small to no gain?

The gain is large for BD as it will strengthen Taka. The net trade in dollar remains the same.

US can not stop it nor will it seek to. It would also be against WTO rules. Chinas biggest trading partner is US and they themselves will start to use RMB very soon. Only reason they have not is because China was building its reserves.

This is zero risk proposal for BD.

Long term Chinese aim is clear but that does not mean BD shy away from things for fear of what someone else will do.

BD will trade with the west and China.... hell the west and chinese are the largest of trade partners... there is absolutely no risk in this whatsoever, its inevitable. BD should be in the party from the outset.

 

[Bengal71]

The gain is large for BD as it will strengthen Taka. The net trade in dollar remains the same.

US can not stop it nor will it seek to. It would also be against WTO rules. Chinas biggest trading partner is US and they themselves will start to use RMB very soon. Only reason they have not is because China was building its reserves.

This is zero risk proposal for BD.

Long term Chinese aim is clear but that does not mean BD shy away from things for fear of what someone else will do.

BD will trade with the west and China.... hell the west and chinese are the largest of trade partners... there is absolutely no risk in this whatsoever, its inevitable. BD should be in the party from the outset.

I am risk averse specifically knowing the behavior of the US. I don't think the risk is low. If the risk is realized the harm will be too great.