The State Bank of Pakistan, the country's central bank, has taken "comprehensive" policy-related measures to "ensure that imports, exports and financing transactions" can be denominated in Chinese Yuan (CNY).
"Chinese Yuan (CNY) is an approved foreign currency for denominating foreign currency transactions in Pakistan. SBP has already put in place the required regulatory framework which facilitates use of CNY in trade and investment transactions such as opening of L/Cs and availing financing facilities in CNY. In terms of regulations in Pakistan, CNY is at par with other international currencies such as USD, Euro and JPY, etc," the State Bank of Pakistan stated, in a statement.
This move unfolds as earlier in December, Pakistan's Minister for Planning, Development and Interior, Ahsan Iqbal, confirmed that Pakistan was considering a proposal to replace the US Dollar with the Chinese Yuan for bilateral trade between the two countries.
Responding to a question after the formal launch of Long Term Plan (LTP) for the China-Pakistan Economic Corridor (CPEC) 2017-30 signed by the two sides on November 21, Iqbal said China has desired that bilateral trade should take place in its currency known as Renminbi (RMB) or Yuan.
"We are examining the use of RMB instead of the US dollar for trade between the two countries," Dawn quoted Pakistan's English-language daily newspaper Dawn quoted Iqbal as saying.
He added that the use of RMB was not against the interest of Pakistan, rather it would benefit the country.
This also comes in the backdrop of the two countries developing the China-Pakistan Economic Corridor, under One Belt One Road (OBOR) initiative, which China came up with in 2013.
The project comprises a network of railways, roads and pipelines that would connect Pakistan's port city of Gwadar in the province of Balochistan, with the Chinese city of Kashgar in landlocked Xinjiang Uyghur Autonomous Region (XUAR).
China, earlier in the day, backed Pakistan after United States President Donald Trump castigated it for providing safe havens to terrorists.
Beijing stated that all should recognise Islamabad's "endeavour and sacrifice to fight against terror."
Trump had tweeted: "The United States has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies & deceit, thinking of our leaders as fools. They give safe haven to the terrorists we hunt in Afghanistan, with little help. No more!"
To this end, China's Foreign Ministry Spokesperson Geng Shuang, in his regular press conference,said, "As we repeatedly said, Pakistan made great endeavour and sacrifice to fight against terrorism and made remarkable contributions to the international counter-terrorism campaign. This should be recognised by all."