Baht-yuan swap agreement grabbing global attention

No country is immune to the impacts of the ongoing currency showdown between eastern and western superpowers. 

A recent development in Beijing suggests that the war has now reached Thailand’s doorstep. 

Thailand’s trade activities and finances have for generations been under the spell of the US dollar, but that now looks set to change. 

The arrangement might never be the same again. 

US authorities must have been alarmed by the outcome of the recent meeting in Beijing between Prime Minister Prayut Chan-o-cha and his Chinese counterpart, Li Keqiang, which yielded four memoranda of understanding. 

These will allow businesses to drop the dollar and instead use yuan and baht in bilateral trade and investments.

Though the dollar still holds sway in global trade, the agreement signed on December 22 is a landmark deal, coming amid a backdrop of growing frustration in the Thai business elite with what it sees as Washington’s heavy-handed response to the May 22 coup and its aftermath. The disdain is especially evident in messages posted by Thai netizens on the US Embassy Facebook page. 

The baht-yuan swap agreement is seen as an added alternative for Thai trade. 

The dollar’s status as a global currency is weakening, while the yuan is enjoying a surge in popularity. 

By signing the deal with China, the Thai government has achieved greater balance in trade in foreign currency. 

The volume of business deals and investments under the deal might not be significant at first, but the currency swap is a major step in preparing for a new future.

Leaders of top agencies in Thailand that have overseen the close baht-dollar relation are now speaking out in favour of the country’s first serious flirtation with the yuan. 

Bank of Thailand Governor Prasarn Trairatvorakul believes the swap agreement will allow the Thai central bank and Bank of China to access liquidity of the two currencies. 

The business sector and financial institutions will have more confidence. 

Stock-market investors will also benefit from the deal because Chinese investors will be encouraged to invest in Thailand and list their companies on our stock exchange. 

Sathit Limpongpan, chairman of the SET board of governors, anticipates an increase its market capitalisation. 

The landmark agreement might not have an apparent impact overnight, but it’s a bold move. 

Thailand has decided to allocate a few of its “eggs” to the yuan basket and put itself on a more “neutral” stance should a currency war between East and West actually take place. 

The move is not just being watched closely by the United States, but also by the rest of the world.