The National Bank of Cambodia (NBC) and the People’s Bank of China in the autonomous Guangxi region of southern China have launched an official yuan-riel exchange rate that allows businesses and individuals to conduct trade settlement activities without using the US dollar as an intermediary currency, an NBC official said yesterday.

NBC Director-General Chea Serey said the yuan-riel exchange rate mechanism was officially launched earlier this month, allowing banks in Guangxi to quote and exchange the two national currencies directly.

“Before, this [could only] be done in Cambodia. Now it can be done in China too,” she said, adding that currently the valuation of the two currencies was done by benchmarking them against the US dollar.

“As the volume of trade settlement in local currencies increases, we will be able to determine a direct quotation without going through the US dollar,” she said.

While the system is so far limited to trade relations between Cambodia and Guangxi, she added that using local currencies for trade settlements reduces exchange risk, which could encourage more trade.

“This will reduce currency risk. The Chinese won’t have to exchange US dollar back to [yuan] and Cambodians won’t have to exchange US dollar into riel,” she said.

“Currency risk is one of the major risks for the import and export business. If this can be reduced then it would be good for businesses.”

Charles Vann, president of the Association of Banks in Cambodia, said that although a yuan-riel exchange rate has long been available in Cambodia, the launch of a direct exchange mechanism will encourage the use of riel for large business transactions.

“There are many business and investment deals with China so it is always good to provide an easier way to conduct business,” he said.