China Commits \$3.7 Billion Trade Loans to Pakistan in Yuan to Ease Dollar Dependency

China has assured Pakistan of \$3.7 billion in trade loans by the end of June, including \$2.4 billion due for repayment next month. This financial support is expected to help Pakistan maintain its foreign exchange reserves above the \$10 billion mark, providing a crucial buffer amid ongoing economic challenges.

According to official sources, China will disburse these loans in **Renminbi (RMB)** — its national currency — rather than U.S. dollars, as part of a joint effort to reduce Pakistan’s reliance on the greenback. The move stems from recent refinancing discussions between the two countries.

Pakistan has already repaid **\$1.3 billion** to the Industrial and Commercial Bank of China (ICBC) during March and April. The same amount is expected to be refinanced in Chinese currency in the coming days.

Additionally, a **\$2.1 billion syndicated loan** extended by three Chinese banks — China Development Bank, Bank of China, and ICBC — is set to mature in June. Preparations for timely repayment are underway. The breakdown of these loans includes 9 billion RMB from China Development Bank, and 3 billion RMB each from Bank of China and ICBC.

Sources indicate that the repayment term is likely to be extended by **three years**, although a final decision on the interest rate is still pending. China has offered a choice between **fixed and floating rates**, but the loan will not be linked to the **Shanghai Interbank Offered Rate (SHIBOR)**.

Furthermore, before the end of the current fiscal year, Pakistan is expected to refinance a **\$300 million loan** from the Bank of China to maintain minimum reserve levels.

This shift away from dollar-denominated lending is not unique to Pakistan. It reflects **Beijing’s broader financial strategy** aimed at internationalizing the Renminbi and reducing dependency on the U.S. dollar in bilateral and global trade.