The Bank of Indonesia (BI) and the People’s Bank of China (PBC) on Monday (Sept 6) officially started the implementation of cooperation in the settlement of bilateral transactions with local currencies (LCS) between Indonesia and China.

The framework for the cooperation includes the use of direct exchange rate quotations and relaxation of certain regulations in foreign exchange transactions between the rupiah and the yuan, Vietnam News Agency (VNA) quoted BI's official statement.

It was prepared based on a memorandum of understanding that was agreed and signed by BI Governor Perry Warjiyo with PBC Governor Yi Gang on Sept 30, 2020, it said.

The expansion of the use of local currency settlement (LCS) is expected to support the stability of the rupiah by reducing dependence on certain currencies in the domestic foreign exchange market.

The use of LCS will also bring direct benefits such as lower conversion costs of transactions in foreign currency, the availability of alternative trade financing and direct investment in local currencies.

To support the operation of the LCS framework using rupiah and yuan, BI and PBC have appointed several banks in their respective countries to act as Appointed Cross Currency Dealers (ACCD).

Banks designated as ACCD in Indonesia include PT Bank China Construction Bank Indonesia Tbk, PT Bank Danamon Indonesia Tbk, PT Bank Maybank Indonesia Tbk, PT Bank Negara Indonesia (Persero) Tbk and PT Bank UOB Indonesia.

Meanwhile, the banks designated as ACCD in China include Agriculture Bank of China, Bank of China, Bank of Ningbo, Bank Mandiri Shanghai Branch, China Construction Bank, Industrial and Commercial Bank of China and Maybank Shanghai Branch. - Bernama

Source from: The Star(2021). Indonesia and China begin using local currencies for bilateral transactions. Retrieve from: The Star(Sep 07, 2021). https://www.thestar.com.my/aseanplus/aseanplus-news/2021/09/07/indonesia-and-china-begin-using-local-currencies-for-bilateral-transactions