China not keen on rupee-yuan payment plan with India’s unstable currency

Beijing, Dec 10: China may stay away from rupee-yuan payment in the short term citing the instability of the Indian currency and the fact that it is not an official reserve currency, the country's Global Times quoted experts as saying. It also said that India has also been requested to narrow its deficits with China by boosting exports.

Citing a PTI report of Sunday, December 9, the Global Times said China has rejected India's proposal to conduct trade in rupee-yuan terms, an idea which was deliberated upon in an inter-ministerial meeting in October. It also cited an unidentified official source to say that Beijing did not accept the proposal though it did not elaborate the reason either.

"Bilateral trade between China and India was about $84.4 billion in 2017, with imports from India reaching about $16 billion and exports from China worth around $68 billion, according to figures released by the General Administration of Customs in January," the Chinese media report said.

The Global Times also said that when it tried to understand from China's central bank - The People's Bank of China - over the alleged rejection on Monday, December 10, there was no response to its query.

"The Indian rupee recorded its worst performance against the US dollar following the country's currency reform at the beginning of 2018, and this was a major reason why China might have rejected India's proposal for a yuan-rupee payment system in bilateral trade," the Global Times quoted Tian Guangqiang, assistant research fellow with the National Institute of International Strategy at the Chinese Academy of Social Sciences, as saying.

'Rupee is not international reserve currency'

"Also, the rupee is not an international reserve currency. If this payment system goes ahead, China will hold a large amount of Indian rupees, which couldn't be widely used in other international transactions except in South Asia," he said.

However, Indian traders based in China feel that the idea is not too bad and could facilitate trade between the two economies.

"If I source from China, of course, I prefer to pay in Indian rupees... because of low transaction costs," Raghavendra Arkasali, an Indian entrepreneur based in Beijing, was quoted as saying by the Global Times.

Charanjeet Singh Arora, who is into electronics business for seven years now, agreed. "It will save money for traders like us to have rupee-yuan deals," Global Times quoted him as saying. Rupee-yuan payments will be quicker and cheaper than dollar-denominated transactions, Arora said.