VOI - Voice of Indonesia | RRI - Radio Republik Indonesia

Bank Indonesia (BI) and People's Bank of China (PBC) on Monday (6/9) officially began the implementation of Local Currency Settlement (LCS) between Indonesia and China.

In its official statement, Bank Indonesia explained that the cooperation framework includes direct quotation and certain regulation relaxation in foreign exchange between Rupiah and Yuan. This cooperation framework was made based on the MoU agreed and signed by Governor of BI, Perry Warjiyo and Governor of PBC, Yi Gang on September 30, 2020.

Besides China, Bank Indonesia also already has LCS frameworks with other partner countries namely Japan, Malaysia, and Thailand. The cooperation implementation was a part of Bank Indonesia's continuous effort to encourage wider local currency use in trade transactions and direct investment with partner countries.

Therefore, LCS use expansion is expected to support rupiah stability through its impact towards less dependence on particular currency in the domestic foreign exchange market.

Bank Indonesia recorded, the use of LCS gives many direct benefits for business people. The benefits include a more efficient forex transaction conversion cost; alternative funding for trade and direct investment in local currency; alternative hedging instrument in local currency; and diversification of currency exposure in foreign transactions.

To support the use of Rupiah and Yuan, Bank Indonesia and People's Bank of China have appointed some banks in each country as Appointed Cross Currency Dealers (ACCD). These banks are seen to have the ability in facilitating Rupiah and Yuan transactions according to the agreed LCS cooperation framework. These abilities include a good security and health level, experience in facilitating trade/investment transactions, being able to provide various financial services, and good relations with banks in partner countries.

There are 11 banks in Indonesia and 8 banks in China as the Appointed Cross Currency Dealer (ACCD).