Indonesia-China Officially Started Local Currency Cooperation, What Are The Implementations?

JAKARTA - Bank Indonesia (BI) and the People's Bank of China (PBC) on Monday, September 6, officially started the implementation of cooperation in the settlement of bilateral transactions with local currencies (Local Currency Settlement (LCS) between Indonesia and China.

In its official statement, BI explained that the framework for the cooperation includes, among others, the use of direct exchange rate quotations and relaxation of certain regulations in foreign exchange transactions between the rupiah and the yuan.

This cooperation framework was prepared based on a memorandum of understanding that was agreed and signed by BI Governor Perry Warjiyo and PBC Governor Yi Gang on September 30, 2020.

"In addition to China, BI also has a framework for LCS cooperation with several other partner countries, namely Japan, Malaysia and Thailand," explained BI, quoted from Antara.

The implementation of this cooperation is part of BI's ongoing efforts to encourage wider use of local currencies in the settlement of trade transactions and direct investment with various partner countries.

Thus, the expansion of the use of LCS is expected to support rupiah stability through its impact on reducing dependence on certain currencies in the domestic foreign exchange market.

The central bank noted that the use of LCS provides many direct benefits to business actors, such as more efficient conversion costs of foreign exchange transactions, availability of alternative trade financing and direct investment in local currency, availability of alternative hedging instruments in local currency, and diversification of currency exposure. used in the settlement of foreign transactions.

To support the operationalization 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 appointed as ACCD are banks that are considered to have the ability to facilitate rupiah and yuan transactions in accordance with the agreed LCS framework, which is to have a good level of resilience and health, experience in facilitating trade/investment transactions and have the capacity to provide various financial services. , as well as having good cooperative relationships with banks in partner countries.

Banks designated as ACCD in Indonesia are PT Bank Central Asia, Tbk, Bank of China (Hongkong), Ltd, PT Bank China Construction Bank Indonesia Tbk, PT Bank Danamon Indonesia, Tbk, and PT Bank ICBC Indonesia.

Then, PT Bank Mandiri (Persero), Tbk, PT Bank Maybank Indonesia Tbk, PT Bank Negara Indonesia (Persero) Tbk (BNI), PT Bank OCBC NISP, Tbk, PT Bank Permata Tbk, PT Bank Rakyat Indonesia (Persero) Tbk ( BRI), and PT Bank UOB Indonesia.

Meanwhile, several banks designated as ACCD in China are Agriculture Bank of China, Bank of China, Bank of Ningbo, Bank Mandiri Shanghai Branch, China Construction Bank, Industrial and Commercial Bank of China, Maybank Shanghai Branch, and United Overseas Bank ( China) Limited.