Indonesian Finance Minister Sri Mulyani Indrawati in Hong Kong on November 1, 2017. Photo: Asia Times / Lin Wanxia

There should be a mutual effort by China and Indonesia to intensify the use of yuan in bilateral trade and investment, Indonesian Finance Minister Sri Mulyani Indrawati told a media briefing in Hong Kong on Wednesday.

China, as the second-largest economy in the world, has been pushing the yuan’s international use, as it looks to lower the costs of trade transactions, which are mostly settled in US dollars at present.

For Indonesia, for which China is its largest trade partner and a major contributor of foreign investment, Indrawati thinks encouraging Indonesian businesspeople to use yuan for trade settlements will require a mutual effort by the two governments.

“If Indonesia is borrowing from China for infrastructures, which I think is going to be in renminbi, [the currency conversion] will then create a revenue stream for rupiah,” she said. “There should be a recognition  [by] both sides of how to address the issue of possible currency mismatch.”

Indrawati further pointed out that it is largely about how the two countries can trust each other in using the Chinese currency.

This trust “should be reflected in terms of contracts. And there should be requirements [for] the capital flow of both countries, as well as how we are going to agree on a bilateral deal,” she said.

Indonesia is willing to increase the use of yuan in order to diversify its portfolio so as to avoid the risk of depending on one only currency. And Indrawati believes that as the Chinese economy and its capital flow system are becoming more open and transparent, it will then be natural for people to be more confident in using yuan.