Home ›› 21 Dec 2021 ›› Opinion
Bangladesh is sparing no effort to achieve the prestigious status of upper middle-income country by 2031 and to finally become a developed nation by 2041. There is no other alternative to expanding international trade for achieving the dream of becoming a developed nation. International trade is an interesting activity and engagement between importers and exporters through which both parties long for mutual benefit. Till now, Bangladesh remains in the bracket of an import-oriented economy. Bangladesh’s import to GDP ratio is higher than export to GDP ratio. So, higher and considerable priority should be attached to overseas exporters.
The lion’s share of imported items comes from China to Bangladesh. China which is the second largest economy of the world trailing just the United States, has been one of the key trading partners of Bangladesh especially since fiscal year 2006-2007. A newspaper reported that out of around $12.09 billion bilateral trade in FY20, Bangladesh’s export to China only accounted for $0.60 billion while imports from China added up to a mammoth $11.49 billion. It is mention-worthy that Bangladesh imported goods worth $ 10.19 billion from China which was 25.2 per cent of total imports of the country during FY 2016-17. In view of significant export volume, the Chinese exporters raised voices for settling their export earnings through Chinese currency - Yuan renminbi. The demand came from China-based exporters considering the need of the time. Besides, current trade relations between the two nations indicate that establishment of Chinese currency has become essential.
The International Monetary Fund (IMF) that facilitates international trade, set a plan to include Chinese renminbi into its SDR basket. The Chinese renminbi joined the US dollar, euro, Japanese yen, and British pound sterling in the SDR basket, effective from October 1, 2016. It is important to note that the SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. The value of the SDR is based on a basket of five currencies-the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen and the British pound sterling. It is worth mentioning that renminbi became the fifth currency of the IMF’s special drawing rights (SDR) basket. The other four currencies are the US dollar, the euro, the Japanese yen and the British pound.
Though being internationally recognized reserve currency, China’s renmibi has not been able to generate enough confidence in the business world. The Chinese currency ‘renminbi’ is finding it difficult to create its confidence in the business arena. It is true that the US dollar and British pound are showing better performance to importing countries. The US dollar, widely known as the dominant currency, has no competitor across the world. The share of the US dollar in the IMF’s Special Drawing Rights or SDR composition remains significant in volume. According to Outlook Business 2017, in SDR composition, US dollar accounts for 41.73 per cent, Euro 30.93 per cent, Chinese Renminbi 10.92 per cent, Japanese Yen 8.33 per cent, and Pound Sterling 8.09 per cent. The intended benefit of SDR is to reduce overdependence on the US and to ensure stability in the financial system. Actually, Chinese currency ‘renminbi’ has been playing foul since inception in Bangladesh. In 2018, Bangladesh Bank (BB) gave permission to open foreign exchange clearing account in Yuan renminbi. But, the development regarding utilization of renminbi is not up to the mark. The economists are of the view that usage of Chinese currency has become a timely need. Bangladesh’s commercial banks, as per BB instruction, have long been using five types of currencies - US dollar, pound sterling, euro, Japanese yen and Canadian dollar for settling import payments. Through opening foreign exchange clearing accounts in those currencies with the central bank, the payment settlement is done.
The Belt and Road Initiative (BRI) undertaken by China is surely to solidify and strengthen trade relations in the coming days between the two nations. As Bangladesh joined the BRI, the decision for import payment settlement with Chinese currency might have been taken. The utilization of the US dollar in the business world is becoming so popular despite the inclusion of Chinese currency in IMF’s SDRs. The introduction of the Euro by the European Union, left the US currency with its shrinking usage. As the IMF is encouraging the business world to do transactions with Chinese currency renminbi, Bangladesh should not dilly-dally in using internationally recognized currency renminbi.
The writer is an economic affairs analyst. He can be contacted at mazadul1985@gmail.com
