China and Cambodia sign RMB clearing arrangement agreement

The People’s Bank of China and the National Bank of Cambodia signed a memorandum of cooperation on Tuesday to establish a RMB clearing arrangement in Cambodia, which will further promote economic cooperation between the two countries, the Chinese central bank said.

Since 2009, China has been trying to promote its currency globally to reduce its reliance on the dollar for trade and investment settlements and challenge the greenback’s status as the world’s main reserve currency.

In the past two years, Beijing has signed similar yuan clearing agreements with Brazil, Kazakhstan, Laos and Pakistan.

China has also signed about 40 currency swap agreements, mostly with emerging market countries, which analysts say provide credit lines to those countries. China and Saudi Arabia announced on Monday that they had signed a $6.93 billion local currency swap agreement.

The RMB clearing agreement will make it easier for Cambodian businesses to conduct financial transactions with China in RMB.

Chinese central bank governor Pan Gongsheng and Cambodian central bank governor Chea Serai also discussed financial cooperation between the two countries, a statement said.

According to data from the United Nations Commodity Trade Statistics Database (COMTRADE), China-Cambodia bilateral trade volume reached US$16.3 billion in 2022.

Knitted or crocheted fabrics were China’s top export to the Southeast Asian country last year, followed by electronic equipment and plastics manufacturing machinery, according to the Commodity Trade Statistics Database (COMTRADE).

Cambodia, one of Asia’s poorest countries, has been a key ally of China in recent years and has been accused of giving China a de facto veto over consensus-based decision-making in the Association of Southeast Asian Nations (ASEAN) in exchange for economic support.

China and Cambodia reached a free trade agreement in 2020, which took only a year to reach, with both countries reducing tariffs on agricultural products and improving market access for their respective tourism industries.

The trade agreement provides Cambodia with a much-needed economic cushion after the European Union imposed punitive trade measures on Cambodia over human rights issues in 2019.