By Aye Yamone
The Central Bank of Myanmar (CBM) has said it will allow traders to make payments through banks for conducting trading activities with China.
The CBM will allow the payment facility beginning this year, and plans to grant permits to private banks to offer the facility. Under the new service, individual traders will be able to make transactions for the purchase and sale of legal goods through designated banks without having to open a bank account.
U Bo Bo Nge, the Deputy Governor of the CBM, said the system will allow traders to use banks in Myanmar and China to pay for trade of goods that are legally recognized by both countries. The two nations have signed an agreement under which Chinese banks will exchange the yuan for other currencies when Myanmar banks have a large reserve of Chinese yuans, he said.
The CBM has asked banks to submit proposals for permits for the payment system. The CBM is taking the lead in implementing the new system, he added.
Under the new system, Myanmar merchants at the border will be able to trade goods worth up to 5,000 yuans per day. At present, Myanmar merchants conducting border trade with China have to reportedly open hundreds of accounts at China-owned banks. The CBM has said it has received no report about such transactions yet.
Earlier, the Chinese yuan earned through exports to China flowed into accounts in China, with the People’s Bank of China finding it difficult to control the use of the accounts to pay for illegal goods and activities.
Later, China began to suspect imbalanced cash flows in and out of bank accounts opened by Myanmar traders, thanks to its advanced technology. Thereafter, China froze the accounts of Myanmar traders suspected of gambling and dealing arms and drugs. The CBM has said it is not authorized to deal with such account closures as Myanmar traders had opened accounts in China without seeking a recommendation from the central bank.
For the time being, only Myanma Economic Bank is making transactions with Chinese banks. The CBM is planning to allow private banks to provide this service soon.
“It is not true that Myanmar has no agreement with the People’s Bank of China and the Bank of Japan to carry out the currency exchange service. Myanmar has already issued licences to branches of foreign banks to exchange Chinese yuan and Japanese yen for other currencies. Myanmar has also negotiated with the People’s Bank of China and the Bank of Japan to implement a government-to-government (G2G) system to settle payments which involve large sums of money,” said U Bo Bo Nge.
(Translated by Khaing Thanda Lwin)