Palm oil exports to China in RMB

PUTRAJAYA: Palm oil exports to China is set to enjoy more cost savings, following Bank Negara Malaysia's appointment of Bank of China in Kuala Lumpur to be the regional renminbi (RMB) clearing house, said Malaysian Palm Oil Council (MPOC).

"We laud this expedient move of both governments of Malaysia and China in the setting up of the first RMB clearing house among emerging nations in Kuala Lumpur. It will help reduce currency risk and hedging cost in palm oil trade," said MPOC chairman Datuk Seri Lee Yeow Chor.

For the past decade, China is Malaysia's biggest palm oil client buying nearly four million tonnes of this kitchen staple to feed its burgeoning population of 1.36 billion.

When palm oil is sold to China, it is quoted in US dollar. Similarly when Malaysia imports goods from China, the cargo is quoted in US dollar, too. 

With the launch of this RMB clearing house in Kuala Lumpur, bilateral trades between Malaysia and China and regional transaction between Asean and China can increasingly be quoted in the Chinese currency. This move contributes to the internationalisation of the RMB currency.

In 'clearing' RMB transactions, Bank of China in Kuala Lumpur will be the intermediary between the buyer and seller to smooth banking and trading transactions, Lee told Business Times on the sidelines of the launch of RMB Clearing Bank in Malaysia by Prime Minister Datuk Seri Najib Razak here on Tuesday.

Currently, Bank of China in Kuala Lumpur already has almost 70 per cent of RMB clearing because it is linked with 26 financial institutions here. 

This is further supported by Bank of China being an official member clearing bank of Malaysia Derivatives Exchange (MDEX).

By having a clearing house for RMB in Kuala Lumpur, Lee explained that palm oil exporters using bank facilities in Malaysia can have direct access to onshore RMB markets in China without having to route their transactions through a mainland lender.

 "This RMB clearing house in Kuala Lumpur will certainly help in smoothing trade flow with China as we need not convert currencies that many times. About 20 per cent of Malaysia's palm oil shipment goes to China. There will be some cost savings," Lee said.

Malaysia and China renew currency swap deal

KUALA LUMPUR: Bank Negara Malaysia and the People’s Bank of China signed an agreement today to renew the currency swap arrangement for another three years to 2018. 

The currency swap size was maintained at RM90 billion (or RMB180 billion). This agreement was signed by Bank Negara Malaysia head Tan Sri Zeti Akhtar Aziz and her Chinese counterpart Zhou Xiao Chuan, in the United States.

The renewed bilateral currency swap arrangement reinforces the ongoing commitment by both central banks in promoting the use of local currencies for payment settlement, Bank Negara Malaysia said in a statement today. 

The currency swap arrangement will further reinforce the economic and financial linkages, as well as promote bilateral trade and investment flows between Malaysia and China, it said. 

The original arrangement was established in 2009 and was last renewed in 2012. --BERNAMA