Bank of China (BoC) has said it will issue renminbi-denominated letters of credit (L/Cs) from a growing number of branches in Sri Lanka.

One of China's four biggest state-owned commercial banks, BoC is riding on the back of fast growing Chinese investment in and trade with Sri Lanka.

Sri Lankan expansion

BoC commenced operations in Sri Lanka in September 2018, and is now looking at opportunities in one of the South Asian island country's most important onshore infrastructure projects, the new financial hub of Port City that is taking shape on reclaimed land in the capital, Colombo.

Development lenders China Development Bank and Export-Import Bank of China are funding the project.

Renminbi clearing

Port City is expected to attract more than US$13 billion in investment and has ambitions to be an offshore renminbi clearing market.

BoC will have a renminbi reserve that will provide it with the ability to serve customers purely in the Chinese currency. The bank plans to issue L/Cs and settle trades and transactions in renminbi.

Around 70 mainland Chinese companies, most of them state-owned and involved in infrastructure and construction, operate in Sri Lanka.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.