Local Business Leaders Give Thumbs Up to China Currency Swap
The local banking and business community has welcomed the $15 billion bilateral currency swap deal signed by Indonesia and China on Monday as a positive signal for business activities across the country.
Sigit Pramono, the chairman of the Indonesian Banking Association, said that the agreement was a positive step toward decreasing Indonesia’s dependency on a single currency, the US dollar, and generally reducing currency risk.
Under the currency swap agreement, China has promised to accept rupiah in exchange for dollars without further collateral.
Indonesia pays a concessionary interest rate for the swap determined by prevailing interest rates, but has emergency access to other reserves.
The agreement will also be widened to apply to Indonesian traders, to ensure that they will be able to trade using the Chinese yuan without first having to change rupiah into dollars.
“Every effort to reduce dependency on a single currency is positive, and by using the yuan we also reduce extra risks,” Sigit said.
The currency swap will not affect banking activities in Indonesia, because foreign currencies are a commodity that banks will secure as needed, Sigit said.
“But the agreement sends a positive signal that should give businesses here a little more confidence,” he said.
Traders also welcomed the idea of extending the currency swap agreement to exporters and importers.
They expressed particular enthusiasm about the future possibility of being able to conduct trades in Chinese yuan, rather than having to convert into US dollars first.
“It will be better and healthier for trade and our foreign reserves, and will reduce our dependency on the dollar,” said Ade Sudrajat, the deputy chairman of the Indonesian Textile Association, or API.
He praised the government’s plan to strike similar deals with other countries that have trade ties with Indonesia, such as South Korea and Japan.
Sigit Pramono, the chairman of the Indonesian Banking Association, said that the agreement was a positive step toward decreasing Indonesia’s dependency on a single currency, the US dollar, and generally reducing currency risk.
Under the currency swap agreement, China has promised to accept rupiah in exchange for dollars without further collateral.
Indonesia pays a concessionary interest rate for the swap determined by prevailing interest rates, but has emergency access to other reserves.
The agreement will also be widened to apply to Indonesian traders, to ensure that they will be able to trade using the Chinese yuan without first having to change rupiah into dollars.
“Every effort to reduce dependency on a single currency is positive, and by using the yuan we also reduce extra risks,” Sigit said.
The currency swap will not affect banking activities in Indonesia, because foreign currencies are a commodity that banks will secure as needed, Sigit said.
“But the agreement sends a positive signal that should give businesses here a little more confidence,” he said.
Traders also welcomed the idea of extending the currency swap agreement to exporters and importers.
They expressed particular enthusiasm about the future possibility of being able to conduct trades in Chinese yuan, rather than having to convert into US dollars first.
“It will be better and healthier for trade and our foreign reserves, and will reduce our dependency on the dollar,” said Ade Sudrajat, the deputy chairman of the Indonesian Textile Association, or API.
He praised the government’s plan to strike similar deals with other countries that have trade ties with Indonesia, such as South Korea and Japan.