Indonesia, China Start Partnership in Local Currency Settlement Framework

TEMPO.CO, Jakarta - Bank Indonesia (BI) and the People's Bank of China (PBC) today began an official cooperation in the settlement of bilateral transactions using local currencies between the two nations. The framework for cooperation includes the use of direct exchange rate quotes, as well as the relaxation of certain regulations in forex transactions between the Indonesian rupiah and Chinese renminbi/yuan.

The cooperation framework was based on a Memorandum of Understanding signed by BI governor Perry Warjiyo and PBC governor Yi Gang on September 30, 2020.

"In addition to China, BI also has the LCS cooperation frameworks with several other partner countries, namely Japan, Malaysia and Thailand," he said as quoted from Bank Indonesia's official statement released Monday, September 6.

To support the operations of the LCS framework using the 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 cross-currency dealers Indonesia are: Bank Central Asia, Bank of China (Hong Kong), China Construction Bank Indonesia, Bank Danamon Indonesia, ICBC Indonesia, Bank Mandiri, Maybank Indonesia, Bank Negara Indonesia (BNI), OCBC NISP, Bank Permata, Bank Rakyat Indonesia (BRI), and Bank UOB Indonesia.

Meanwhile, Bank Mandiri Shanghai Branch is named as an official ACCD in China, together with others including the Bank of China and Maybank Shanghai branch, among others.  

According to Perry, the currency rule does not only apply to trade transactions between Indonesia and China. The use can be extended to various sectors, such as financial market penetration and investments.

CAESAR AKBAR