The junta’s Consumer Affairs Department under the Ministry of Commerce has informed the Myanmar Iron and Steel Association (MISA) that importers who use Chinese yuan in lieu of US dollars will be prioritized for iron and steel import licenses, according to a letter the association sent to its members.
In the letter dated May 17, the MISA suggests member importers prepare for the move by converting currency amounts in their proposals from dollars into yuan when applying for licenses.
Until this year, traders of iron and steel in Myanmar used only dollars for export and import transactions, but since last month the regime has attempted to persuade importers to conduct their business in yuan.
Economic experts said the junta is doing everything it can to stem dollar outflows in a bid to reduce its foreign-exchange shortfall. Promoting the use of the yuan is also a way to curry favor with China while reducing its reliance on the greenback, they said.
“Indeed, it was originally China that sought to promote its currency in this way, and it has been doing so for a few years. The regime is now helping to promote the currency as a way of reducing its dependence on the dollar,” said U Moe, an economist in Yangon.
The junta-controlled Central Bank of Myanmar (CBM) has been taking steps to smooth the process of using the yuan in Myanmar-China trade since cross-border trade resumed in December 2021.
In the last year, the CBM has designated Bank of China Hong Kong Limited, Industrial and Commercial Bank of China Limited, CB Bank, AYA Bank, UAB Bank, Myanmar Oriental Bank (MOB), and regime-controlled Myanma Economic Bank as institutions authorized to handle direct yuan/kyat transactions for cross-border traders.
Despite the regime’s promise to favor importers who apply in yuan, in practice, most Chinese iron and steel traders still tend to prefer dollars and do not accept yuan.
“We have been using only dollars for importation of iron and steel for a long time. And, since the exchange rates are always changing due to the unstable rates for the yuan, the Chinese traders themselves prefer to receive payments in US dollars,” said an iron and steel importer.
Construction businesses are also expected to be impacted, as the prices of iron and steel in the country have risen since the department’s announcement.
About 97 percent of Myanmar’s iron and steel is imported from abroad and about 3 million tons of iron and steel, including related materials, are imported annually, with China being Myanmar’s biggest supplier, according to MISA’s figures.
