Laborers carry rice bags at a jetty in Yangon, Myanmar, Aug. 6, 2020. Myanmar exported over 2.25 million tons of rice and broken rice as of July 17 this fiscal year (FY) 2019-2020, according to a release from the Myanmar Rice Federation on Wednesday. (Xinhua/U Aung)

Myanmar will include yuan in its official settlement currency for border trade with China, and the targeted settlement scale in the pilot phase is set at around 2 billion yuan ($314 million), equivalent to about one fifth of the value of cargo border trade between the two countries via inland routes, sources close to the matter told the Global Times.

The move aims to address a crunch of US dollar and other foreign currencies that Myanmar now faces, after the Southeast Asian country was mired in an economic meltdown amid instable political situation, sources and analysts said. China's booming trade with Myanmar will provide a stable source for Myanmar banks to access yuan, helping alleviate its financial difficulty. 

It also marks an important step in China's joint efforts with neighboringcountries to push forward yuan's internationalization and counter US dollar hegemony, as dollar has largely aided US' bullying practices to impose unilateral sanctions on other country, analysts said. 

The yuan's use in trade settlement will pilot in border trade at the initial stage, focusing on transactions of small commodities and daily necessities, which the locals call "small trade."

"In the future, the yuan'ssettlement will expand to cover what we called 'big trade,' which refers mainly to container cargo shipping loaded with big commodities, marine products, machines and equipments," the anonymous source noted. 

The Global Times learned that an official ceremony, which Myanmar central bank and Chinese embassy officials are scheduled to participate, is expected to be held on January 1, 2022.

"This is an immediate helping hand for Myanmar people, who have been suffering from rising inflation, job losses and a stalling economy. It at least partly ensured their livelihood," Zhou Rong, a senior researcher at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Wednesday. 

The yuan was included in Myanmar's official settlement currency in January 2019. But industry insiders said this move at that time was more symbolic, as all contracts and trade were still settled in either dollars or Myanmar kyat.

Zhou said that the upcoming move, in the long-term, will also solve a monopoly of dollar in Myanmar's foreign currency reserves. The US is notoriously known for abusing dollar's dominating status to levy sanctions on other country, and yuan'sfurther expansion in Myanmar's trade settlement may also address these issues, analysts said. 

In October, the Myanmar's central bank announced that it will allow yuan to be convertible at local banks that have license for conducting business related to foreign currency settlement and conversion as well as non-bank currency conversion institutions.

Global Times