China and Indonesia have signed a new agreement to deepen the use of local currencies in bilateral trade and investment.
The memorandum of understanding, signed Sunday by the governors of both countries’ central banks, marks a step forward in regional financial cooperation.
Pan Gongsheng of the People’s Bank of China and Perry Warjiyo of Bank Indonesia formalised the deal, expanding on a 2020 agreement limited to current accounts and direct investments.
The new pact now includes capital and financial account transactions, broadening the framework for cross-border currency use.
Officials say the move aims to reduce reliance on third-party currencies such as the US dollar and stabilise regional markets.
It also seeks to forge closer ties between the monetary and financial systems of Asia’s largest economy and Southeast Asia’s biggest archipelago.
Trade between the two nations reached $147.8 billion in 2024, up 6.1% from the previous year, Chinese customs data shows.
Chinese exports to Indonesia surged 17.6% year-on-year, totalling $76.7 billion.
China remains Indonesia’s largest trading partner, and the expanded currency settlement deal is expected to streamline future financial flows.
Analysts see this as part of a broader push by China to internationalise the yuan and build resilient regional partnerships.
The deal reflects growing momentum in Asia to move away from dollar-dominated trade, aiming for greater autonomy and economic stability.
By settling transactions in local currencies, both nations hope to reduce exposure to global market volatility and transaction costs.
This strategic shift signals an evolving regional order, where economic giants look to local solutions for global challenges.