(Yicai) Sept. 12 -- The central banks of China and Indonesia have launched a framework on local currency transactions and a pilot project for cross-border QR code connectivity to enhance the payment cooperation between the two countries.

The LCT framework is an upgrade from an existing one, expanding local currency settlements to all balance of payment items and further promoting the use of local currencies in bilateral trade and investment, the People’s Bank of China and Bank of Indonesia announced yesterday.

The PBOC and BI established a local currency settlement framework in 2020 to facilitate account transactions and direct investment settlements in local currencies. In May this year, they signed a memorandum of understanding to upgrade the LCS to an LCT framework.

The two sides also kicked off the China-Indonesia Cross-Border QR Code Connectivity pilot, which will use local currencies for settlement, according to yesterday’s statement. It is expected to be fully operational this year.

The LCT framework and the QR code connectivity are important outcomes in the two countries’ bilateral financial cooperation, Pan Gongsheng, governor of the PBOC, said in his speech. He also called for further cooperation in payment system connectivity, local currency usage, financial market opening-up, and digital currency.

LCTs between Indonesia and China exceeded USD6.2 billion in the first seven months of this year, accounting for around 45 percent of Indonesia’s total LCT volume with its trading partners, BI Governor Perry Warjiyo said.

LCS frameworks were initiated by several central banks in the Association of Southeast Asian Nations to reduce exchange rate risks and currency conversion costs for businesses by increasing the use of local currencies within the region. Indonesia has already signed similar agreements with Japan, Malaysia, South Korea, and Thailand.

Editors: Dou Shicong, Futura Costaglione