Pakistan-China Currency Swap Agreement

Negotiations over swap currency agreement between Pakistan and China, with a view to conduct mutual trade in Pakistani rupees and Chinese Yuan instead of dollars, are underway. The governor of the State Bank would shortly visit China to give final shape to this agreement. The sources have learned that diplomatic talks between both countries in this regard have been completed. Now the governor of the State Bank would visit China to discuss technical issues in this regard, in which implementation of the agreement would be reviewed.

Impact of Economic Recession
The United States is witnessing recession these days. Several major companies are running into losses and several banks have also defaulted. Therefore, the credibility of dollar at global level has been damaged. This is the reason that the prices of gold are on the rise in the international market.

Some economic experts have voiced their opinion that if such situation continues, the economic situation of the United States would get worse by 2015; rather it is likely to take a dangerous turn. According to a Russian economic expert, the United States would disintegrate into 15 states at that time around.

BRIC's Trade and Economic
Four countries are progressing in the economic field very fast at this time. The US investment bank, Goldman Sachs, has used the term BRIC (Brazil, Russia, India, and China) for these four countries. The reason is that these four countries have made a strong group in the field of trade and economic progress. The growth ratio of national product of Brazil is more than 5 percent.

Russia is the only country where most of the billionaires are residing now. The population of Russia is gradually decreasing and its per capita income is on the rise. India has increased its contacts with Europe, the United States, and China. Its trade volume is increasing with BRIC group. The trade volume between India and China is around $52 billion, while between China and the United States it is $333 billion. The foreign exchange reserves of China are around $ 1.9 trillion.

World Bank Report
A statement by the Chinese prime minister has been published in the US journal the Newsweek in its 30 March edition, in which he has expressed concern over recession in the United States and decline in its economic situation. He further added that China has lent loans to the United States and it is worried over the payment. The growth rate of the Chinese national product is around 7 percent, while that of the United States and Japan is 3 percent, respectively.

Moreover, the United States, which stood first in the World Bank, now stands at No 5; whereas, China that used to be on No 10, now stands at No 1. The said group of four countries is increasing trade and prefers local currencies instead of dollars for the trade business. Therefore, the mutual trade of the currency group of these countries has been detached from dollar, which has very healthy effects, while the future of dollar seems to be in jeopardy.

Long-Term Cooperation
Now China has conducted negotiations regarding a trade agreement to conduct trade in local currencies. If the currency swap agreement is inked between China and Pakistan, it would prove helpful for Pakistan in saving its foreign exchange reserves. The European Union countries are already trading in local currencies through euro. Pakistan should also increase its trade links with BRIC group. Pakistan has a trade agreement with China at this time around. However, the trade ratio between both countries is far less than that of between India and China. Similarly, the trade could not be increased with Russia as well. Therefore, currency swap agreement would prove useful for regional countries.

Dollar was badly defeated in the currency market on 10 September, while the value of euro was witnessed increasing from 1 to 3 percent. The countries dealing in euro currency are strengthening credibility of euro in the world for their business credibility. The United State is playing with gold market to keep dollar intact and developing countries are experiencing its adverse effects. The offer to ink swap currency agreement is a result of Pakistan-China friendship agreement, which would play an important role in Pakistan's economic and financial stability. This is also an open proof that China is a true friend of Pakistan.