Pakistan and China have signed an agreement to softenrules and regulations to pave the way for establishingbranches of their respective banks in each other’s countries.Both the countries reached the agreement during a meeting of the China-Pakistan Free Trade Agreement in Islamabad,reducing the requirementof assets for the proposed banks from $20 billion to $15 billion at the end of the year prior to the submission of the application. Under the agreement, the Pakistani banks are also allowed to open their businesses in Chinese currencyafter one year of their operations in China. Previously, the limit to open the businessin the local currency was three years while the Chinese government has also waived a condition to maintain profitable banking operation for two consecutive years prior to the application for dealing in the Chinese currency.
Pakistan and China are close trade partners and cooperation in the banking system was necessary as the businessmen had to carry out their transactions through foreign banks. Now after the agreement, the financial transactions will be routed through the Pakistani banks in China and a substantial amount of service charges paid to foreign banks will be saved. The Chinese investments for the economic corridor will also be made through the Pakistani banks while establishment of a working group on trade and investment has also been agreed upon between the two sides.
The financial experts hope that the banking sector cooperation between the two countries will help reduce current account deficit of Pakistan. The two countries have also established a working group to share customs-related information and establishcustoms electronic data exchange to launch an online system next year. The officials from both sides expressed concern over insufficient use of concessions extended by the two governments to the business community while tariff reduction modalities will be discussed in another meeting. There are various fields of economy in which both the countries can help each other while SAARC is also an important forum and China’s participation in it can open now vistas of cooperation among the member countries. At the moment, SAARC is not fully functional due to tension between Pakistan and India, but the participation of China in the forum more than its official observer status can bring a positive change in the economic relations between member states. Pakistan, Sri Lanka and Maldives have already desired an increased role of China at SAARC despite India’s opposition to it. However, trade and economic cooperation between member states can usher in a new era of prosperity in the region.
