China Proposes RMB Internationalization Pilot in Gwadar to Boost Trade and Reduce Costs
China has urged Pakistan to launch an RMB internationalization pilot project within the Gwadar Free Zone to facilitate trade settlements and reduce foreign exchange conversion costs and risks. This proposal was raised during the 7th meeting of the Joint Working Group (JWG) on Gwadar under the China-Pakistan Economic Corridor (CPEC), amid ongoing concerns over security in the region, sources told Business Recorder.
Both countries commended Pakistan’s efforts to route public sector bulk cargo through Gwadar Port, which has significantly contributed to the port’s operationalization and spurred the development of the local logistics industry, creating numerous jobs. Pakistan pledged to continue promoting Gwadar Port’s expansion.
Officials highlighted Afghanistan’s transit trade as a major growth driver for Gwadar’s bulk cargo throughput, aiming to establish Gwadar as a key hub for Central Asia’s landlocked nations. They also emphasized the potential of ocean fishing transshipment at Gwadar to cut transportation costs, urging further policy support from Pakistan to enhance the port’s appeal for this business.
The two sides discussed industrial cooperation in Gwadar’s North Free Zone, with a focus on developing mining industries. China also stressed the importance of ensuring reliable freshwater and electricity supplies for Gwadar’s operations, urging Pakistan to accelerate grid connections to the port and Free Zone.
China Overseas Port Holding Company (COPHC) proposed establishing the RMB internationalization pilot, advocating for Chinese and Pakistani banks to provide RMB-based services in the Free Zone, such as currency exchange, cash services, and trade settlements. Pakistan’s support for the initiative is anticipated.
The security situation in Gwadar remains a top priority for China, which called for enhanced security measures, including the construction of Gwadar Security City, and improved counter-terrorism cooperation. China also requested Pakistan expedite the M8 highway project to improve connectivity between Gwadar and economically developed areas.
Pakistan assured that longstanding issues like provincial tax exemptions and utility shortages will be resolved by June 2024. Pakistan also urged COPHC to fast-track development in the North Free Zone to attract Chinese industries.
On infrastructure, the New Gwadar International Airport (NGIA) is over 90% complete, with a targeted finish by August 2024. China is mobilizing resources to finalize mechanical and electrical installations, interior works, and other tasks to ensure timely completion.
Amid security challenges, including recent terrorist attacks, China expressed appreciation for Pakistan’s efforts to safeguard the project and urged further security enhancements.
Dredging of Gwadar Port’s berthing areas and channels was also discussed. China emphasized the need for expanding the port’s current channel, as it can only accommodate one-way navigation for 50,000-ton container ships. Both sides committed to securing financing for this expansion under the CPEC framework.
Pakistan is currently preparing the project plan (PC-1) for dredging and aims to submit necessary documents to China soon, with both countries working toward securing financing for the project.
