Bank Negara is to offer a ringgit trade financing facility in China.

The facility will be provided by the representative office the Malaysian central bank has just opened in Beijing.

“It will allow Chinese banks to provide ringgit trade financing in China,” remarks the bank’s governor Zeti Akhtar Aziz. The size of the facility has not been revealed.

“The Asian region will be an important growth centre in the world economy contributing to global stability. China in particular has been successful in rebalancing its economy amidst structural adjustments and reforms that bring its economy to a sustainable growth trajectory,” comments Aziz.

This will be especially true of trade between the two nations, which has been consistently been expanding at double-digit growth rates over the last two decades.

The new office will also be providing a renminbi liquidity facility for licensed onshore banks, allowing them to borrow or lend renminbi with Bank Negara.

“The size of renminbi trade settlement in Malaysia is expanding progressively reflecting the shift among both Malaysian and Chinese companies across the commodity, manufacturing and services sectors. There is also a growing interest in raising financing in renminbi in the Malaysian bond market,” Aziz says.

At the same time, Bank Negara and the People’s Bank of China have signed an MoU that will allow financial institutions to use home currency as collateral (in the form of securities or cash) to obtain domestic liquidity from China.