China Exim Bank delegation to discuss CIPS, Panda Bonds with BB

A delegation from the Export-Import Bank of China (China Exim Bank) is scheduled to meet Bangladesh Bank today to discuss the possibility of Bangladesh joining China's Cross-Border Interbank Payment System (CIPS) and issuing Panda Bonds, according to central bank officials.

The discussions come as China seeks to expand the use of its financial infrastructure and currency in cross-border transactions, while Bangladesh explores options to diversify payment channels and financing sources.

A senior Bangladesh Bank official told The Business Standard that the Chinese delegation would present proposals on the two initiatives before the central bank assesses their feasibility and potential implementation.

"The China Exim Bank delegation is expected to arrive today. They want to discuss Panda Bonds and the Cross-Border Interbank Payment System (CIPS). They will present their ideas, and the central bank will then consider whether these can be implemented," the official said.

The delegation is also expected to hold meetings with the Finance Division, the Bangladesh Investment Development Authority (Bida) and the Bangladesh Economic Zones Authority (Beza).

China has previously proposed that Bangladesh join its payment network, particularly amid growing complexities in international financial transactions following Western sanctions on Russian banks and broader shifts in the global economic landscape.

In March 2024, Yao Wen discussed the CIPS initiative with the then-governor of Bangladesh Bank.

According to Bangladesh Bank sources, CIPS could become the second major international payment network used by Bangladesh after the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system, which dominates global financial messaging.

Sources said Bangladesh Bank has already opened a nostro account with China's central bank. A nostro account is a bank account held by a domestic bank in a foreign bank in the currency of the country where the account is maintained.

Although some Bangladeshi banks maintain nostro accounts in China, their use remains limited because most international trade transactions are still conducted in US dollars.

What is a Panda Bond?

Panda Bonds are yuan-denominated bonds issued in China's domestic bond market by foreign governments, international financial institutions or multinational corporations.

The instruments allow foreign issuers to raise funds directly from Chinese investors. The bonds are denominated in Chinese yuan (RMB), while investors are primarily Chinese institutions, although foreign investors may also participate in certain cases.

Bida meeting to focus on investment issues

Nahian Rahman Rochi, executive member and head of business development at Bida, said the Chinese delegation has a scheduled meeting with the investment promotion agency.

"Various investment-related issues will be discussed during the meeting. However, CIPS and Panda Bonds are primarily on the agenda for discussions with Bangladesh Bank and are not directly under Bida's purview," he said.

Economists view China's CIPS initiative as a potentially strategic alternative payment channel for Bangladesh, although they caution that its practical benefits will depend largely on bilateral trade and financial flows.

Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development (RAPID), said alternative payment systems could serve as an important long-term strategic option for Bangladesh.

"These initiatives can be positive for Bangladesh, but their actual benefits will depend on the volume and direction of trade and financial transactions between the two countries," he told TBS.

Razzaque noted that Bangladesh imports significantly more from China than it exports, meaning that introducing yuan-based transactions alone would not automatically generate substantial benefits.

He argued that greater Chinese investment, loans and project financing would be necessary to make cross-border settlements under CIPS more effective.

"If China increases investment in economic zones, infrastructure projects and industrial sectors, or extends financing in yuan, those inflows could facilitate cross-border settlements. Otherwise, Bangladesh may still need to rely on the US dollar for a large share of its transactions," he said.

"It opens up a new possibility, but the extent of the real benefits will depend on the future trajectory of economic relations and transaction flows between the two countries," he added.