Sri Lanka launched a yuan settlement facility through Bank of China’s Colombo branch, opening a more direct payment channel for trade with China, with the potential to lower the currency conversion costs and speed up transactions.
Authorised by People’s Bank of China, the arrangement enables Bank of China’s Colombo branch to serve as the settlement bank for cross-border yuan payments and transactions between the local banks in the Chinese currency.
The facility was formally launched in Colombo on October 15, with the participation of Labour Minister and Finance and Planning Deputy Minister Dr. Anil Jayantha.
A key benefit is the reduced need to convert the rupees into US dollars and subsequently into yuan when settling the eligible trade transactions with China.
Direct yuan settlement is expected to lower the costs of these intermediate conversions and reduce exposure to exchange rate movements during the process.
The arrangement also seeks to remove the processing delays faced by the Sri Lankan banks when the yuan transactions between them have to be routed through the banks in China.
By providing a local settlement channel, the facility is expected to streamline the payments, reduce the intermediary costs and offer the importers and exporters more convenient financial services.
The Finance Ministry said the launch strengthens the links between the Sri Lankan banking system and China’s financial system, expanding the infrastructure available to support the bilateral trade and financial cooperation.
Chinese Ambassador to Sri Lanka Wei Huaxiang, Bank of China Vice President and CEO Zhang Hui and Central Bank Deputy Governor K.G.P. Sirikumara attended the event, alongside the representatives of the Chinese and Sri Lankan business communities.
