Beyond the Dollar: Can Pakistan Trade More in Yuan?

Summary

Pakistan now has local renminbi (RMB) settlement and clearing arrangements, a standing currency swap with China and, since May 2026, its first sovereign Panda Bond. Much of the commentary presents these as dedollarisation. This Insight asks a narrower question, the one facing a Chinese manufacturer deciding how to invoice a Pakistani buyer or fund a local subsidiary: which banks can actually facilitate RMB transactions in Pakistan, what direct settlement does and does not change, and how far settlement capability extends into usable liquidity and financing.

It separates three layers that local commentary routinely confuses. Settlement is paying and receiving funds in RMB for a transaction. Clearing is the bank infrastructure through which that payment passes. Liquidity is the depth of RMB funds actually available within Pakistan’s financial system. The Insight argues that Pakistan has built the first two further than the third, and that the binding constraint now sits in liquidity and financing, where the public evidence thins out sharply.

Key findings

1. The clearing rails are real. The State Bank of Pakistan authorised Bank of China Pakistan to run a local CNY settlement and clearing setup in 2018, and the People’s Bank of China designated ICBC Karachi Branch as Pakistan’s RMB clearing bank, a designation publicly launched in October 2023.
2. Usage has grown from a low base. RMB denominated imports rose from about 2% of Pakistan’s imports from China in FY2018 to around 18% in FY2022. That is a share of bilateral imports, not of the total import bill, and no public data were identified for FY2023 to FY2026.
3. Fewer conversions is not proof of lower cost. Direct settlement removes the dollar leg of a transaction, but whether total cost falls depends on the depth and spread of the RMB to PKR market, which has not been quantified.
4. The swap line is not a company facility. The CNY 30 billion swap between the two central banks is a sovereign liquidity backstop. On the available evidence, continued reliance on that backstop, rather than a self-sustaining private RMB liquidity pool, is the more plausible reading.
5. Advertised capability is not a committed facility. Two banks hold clearing arrangements authorised by the State Bank. A third, Standard Chartered, advertises RMB connectivity at group level, but its local product range could not be confirmed from public sources.
6. The Panda Bond is a different instrument. The CNY 1.75 billion issue of May 2026, about USD 258 million, relied on partial guarantees from the Asian Development Bank and the Asian Infrastructure Investment Bank, and is a capital market instrument separate from trade settlement.

The way forward

For firms, the Insight sets a due diligence standard: obtain written, dated confirmation of the specific product, tenor, pricing and credit limit on offer before committing, rather than relying on a bank’s general statement of capability. It also sets out five questions that decide whether RMB settlement suits a given transaction, from the currency of the firm’s own funding to how settlement would behave if RMB liquidity tightened during a period of stress.

For policymakers, it proposes that the State Bank publish three indicators twice a year: utilisation of the CNY 30 billion swap relative to its ceiling, the size of Pakistan’s onshore RMB deposit base, and the CIPS participation status of Pakistani banks, distinguishing direct from indirect participants. Doing so would let the question of RMB usability be answered with numbers rather than argued qualitatively.

Inside the Insight

1. Context
2. Settlement Is Cheaper to Describe Than to Prove
3. Two Layers, Routinely Confused
4. Capability Is Not a Committed Facility
5. The Counterparty Has a Vote
6. The Panda Bond Is a Different Instrument
7. Implications
8. The Way Forward
9. A Note on Method and Limitations
10. References

About the author

How to cite

Khan, R. (2026). Beyond the Dollar: Can Pakistan Trade More in Yuan? Ardent Research Solutions. https://arspakistan.pk/insights/rmb-settlement.html

Related research

• ARS Policy BriefPakistan as China’s Next Manufacturing Base
• ARS InsightPlug and Play, or Still Plugging In?
• ARS InsightThe Arbitration Gap: What Pakistan Can Learn from Astana

This summary is drawn from the full publication, which should be read for the sources, qualifications and method behind each finding. It reflects the views of the author and not necessarily those of ARS or its affiliates.