T

he government is seeking to benefit from the inclusion of China’s renminbi in the International Monetary Fund’s (IMF) special drawing right (SDR) in October, hoping that the free use of the currency will help improve trade relations between the two countries.

The SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves.

Its value, according to information on the IMF’s website, is currently based on a basket of four key currencies, namely the US dollar, the British pound, the euro and the Japanese yen.

The inclusion of the renminbi is slated for Oct. 1 and after that it will be freely usable by the international community as it will be convertible under the flexible capital flows in and out of China.

An expert staff member of the State-Owned Enterprises Ministry, Sahala Lumban Gaol, said recently that the renminbi was slowly becoming an important part of trade, considering that China is one of Indonesia’s major trading partners.

“Our economic growth and activities will lead our trade using more renminbi in the future,” he said.

China, which is the world’s second biggest economy, sealed US$27.81 billion worth of trade with Indonesia from January to August 2016. Data from the Central Statistics Agency (BPS) placed China as Indonesia’s third-largest export destination and its largest import source.

Exports mostly consisted of commodities, such as mineral fuels, wood and rubber, while imports were made up of mechanical appliances and electrical machinery.

Indonesia already has a bilateral currency swap arrangement worth 130 billion renminbi ($19.49 billion) with the People’s Bank of China (PBOC) — which is China’s central bank — that will facilitate Indonesia in obtaining the currency whenever necessary, including for trade.

Zhang Min, the country manager at the Bank of China’s Jakarta branch, said the use of the renminbi would promote the trading and economic development of Indonesia and China and reduce unnecessary foreign exchange losses.

“The usage of the renminbi will reduce the losses caused by US dollar exchange fluctuations in bilateral trade activities, which will also lead to the healthy development of bilateral trade and investment,” he said.

More than 30 overseas central banks and monetary authorities have brought the renminbi into their foreign reserve portfolios to the amount of 864.70 billion yuan by the end of 2015, Zhang said, quoting data from the PBOC.

Separately, Institute for Development of Economics and Finance executive director Enny Sri Hartati warned that the inclusion of the renminbi in the SDR basket could strengthen the currency, thus making importation more “attractive” than exportation.

“The prices of commodities have been plunging and we still see limited demand for them. If the renminbi strengthens, we could see a stagnation of exports to China,” she told The Jakarta Post.

Indonesia is known for its abundant natural resources, including coal and tin. However, as the global economy slumped and has remained weak for years, demand for commodities fell along with prices. (vps)