In a bid to reduce its dependence on US dollars, Myanmar’s military regime has made it mandatory for exporters and importers to use yuan in trade transactions with China.
The order, issued on June 1 by the junta-controlled Foreign Exchange Supervisory Committee, requires traders to open yuan accounts in local banks if they want permits for cross-border transactions.
Traders applying for import licenses must submit proof that they have Chinese currency in their bank accounts, which they can obtain either from export earnings or by purchase from a local bank.
Previously, both US dollars and yuan were permitted for use in border trade with China.
“As of June 1, all export earnings are received in yuan, not dollars,” a border trader in Shan State’s Muse told The Irrawaddy. “Traders can’t import products [from China] unless they have export earnings, which must be in Chinese yuan. If you import goods worth 100,000 yuan from China, your export earnings must be at least 100,000 yuan. Only yuan is allowed for border trade.”
Junta restrictions aimed at stemming dollar outflows are suffocating traders, the border trader said. Business operators can no longer import goods unless they can show export earnings in their bank accounts, while 65 percent of their export earnings must be converted at the official exchange rate of 2,100 kyats per dollar. And to import goods, they have to buy dollars in the market at a rate of 2,800 to 3,000 kyats.
Another trader said: “Importers have to buy yuan from exporters to conduct their trade. If we want to import electronics and foodstuffs from China, we have to buy yuan at the market rate to do so. So, there are problems. Costs will increase.”
The junta-controlled Central Bank of Myanmar (CBM) has set the reference exchange rate at around 300 kyats per yuan. But the actual market rate is over 400 kyats.
The CBM has taken steps to smooth the yuan transaction process since cross-border trade with China resumed in December 2021.
Over the last year, the CBM has authorized seven banks – Bank of China Hong Kong, Industrial and Commercial Bank of China, CB Bank, AYA Bank, UAB Bank, Myanmar Oriental Bank, and the regime-controlled Myanma Economic Bank – to handle direct yuan-kyat transactions for cross-border traders.
Myanmar exports agricultural products including rice, broken rice, beans and pulses, sesame, watermelon, rubber, and fishery products while importing building materials, electronics, foodstuffs, consumer goods and medicines.
Border trade with China has recently slowed to around 100 trucks per day.
Last month, the junta’s Consumer Affairs Department under the Ministry of Commerce informed the Myanmar Iron and Steel Association (MISA) that importers who use yuan instead of dollars will be prioritized for iron and steel import licenses.
Myanmar’s iron and steel traders had been using only dollars for export and import transactions before the incentive to use yuan was dangled last month.
The Consumers Affairs Department has also told pharmaceuticals importers to use yuan and Thai baht in place of dollars.
The Foreign Exchange Supervisory Committee was formed by the regime with the stated aim of stabilizing currency exchange rates and “using foreign currency effectively for national economic growth”. The committee is led by Lieutenant-General Moe Myint Tun, who is under sanctions imposed by the US and European Union over the junta’s killing of peaceful protesters.
