The State Bank of Pakistan made a rather strange announcement a few days ago. A notice by the bank informed the public that the bank had carried out comprehensive policy related measures to ensure that both private and public sector enterprises could use the Chinese yuan for bilateral trade and investment activities. Even more puzzling to financial circles was the earlier announcement by the Foreign Office spokesperson that the two countries would "actively" use bilateral currencies for trade and investment. The problem is that the bilateral currency swap agreement between the two countries was signed during the time of prime minister Yousaf Raza Gilani well over six years ago. Apparently, that never really took off, with Chinese traders refusing to accept Pakistani currency for any kind of swap or otherwise.
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WNU Editor: The above First Post analysis of this agreement is spot on. My immediate reaction when I read this announcement of a currency swap between the two countries was to scratch my head and say to myself that it does not make sense. It has already been tried, and it failed because Chinese traders refused to accept Pakistani currency for any kind of swap or otherwise. So why try again? My guess is that the Chinese government made the decision to make this work by providing guarantees to Chinese traders (i.e. securing any transaction), and in return demanded and received major concessions from Pakistan. As to what are those concessions .... maybe this .... Pakistan Is In Talks With China For The Chinese To Build Their Second Overseas Military-Naval Base Near The Pakistani Port Of Gwandar.
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