Vientiane Times said on January 13th that the Agreement on Bilateral Local Currency Cooperation between the Bank of the Lao PDR and the People’s Bank of China (PBOC) was inked on January 6th in Beijing, China, during Lao Prime Minister Thongloun Sisoulith’s official visit to the country from January 5th-9th.

The People’s Bank of China (PBOC)(Photo: Reuters)

Under the deal, residents of Laos and China are allowed to use both LAK and CNY in trade and investment under both countries’ provisions of legislations.

The banks encourage commercial banks in the two nations to enhance cooperation and facilitate the exchange of LAK and CNY.

The PBOC said the agreement will help boost financial cooperation as well as promote trade and investment between the two countries.

Meanwhile, a senior official from the Bank of the Lao PDR said the agreement will support trade and investment activities between the two nations by reducing trade transaction costs.

Analysts say Laos may benefit from the Laos-China monetary cooperation, and diversification of the currency exchange policy will drive down demand for the USD, which is being used in Laos to import goods.

Currently, Laos is facing challenges in maintaining a stable exchange rate between the LAK and the USD, and LAK and THB. The value of the USD and THB has increased in the past few months.

To date, China is the largest foreign investor in Laos. Two-way trade has surged significantly in the past few years, and the value is expected to grow further in the time ahead when the Laos - China railway becomes operational in 2021./.