11/02/2026
Papua New Guinea Prime Minister James Marape has tasked the Bank of Papua New Guinea (BPNG) to explore the Chinese yuan (RMB) for trade settlements, a strategic response to the nation's K13 billion annual trade surplus with China, its largest partner.
This directive echoes Marape's 2023 instruction to BPNG on partner currencies and arrives amid ongoing foreign exchange pressures. Despite USD inflows from LNG, oil, nickel, and palm oil exports, import demands continue to strain reserves, which stood at $3.6 billion late last year, enough for five months of coverage.
PNG's exports to China have surged, fueled by Beijing's appetite for commodities. Marape revealed this in late 2025 remarks saying “This shows the importance China has attached to the relationship it has with PNG... China is no ordinary nation.
"It has security of markets for all our produce. Papua New Guinea needs good markets for the export of our natural resources, and China is that market—just as India, Indonesia and the rest of Asia are.”
Yuan-based transactions could cut conversion costs by 2-5% and ease forex queues that have hit aviation fuel supplies and manufacturing, all while aligning with Marape's 2026 budget focus on commodity-driven stability.
The benefits are clear and practical. Yuan-based transactions would deliver immediate relief through reduced conversion fees (2-5% savings) and faster liquidity for exporters, addressing PNG's chronic forex queues. For longer-term stability, it provides a hedge against USD volatility, the key factor behind the kina's 10% decline in 2025.
Globally, as BRICS nations push de-dollarisation, this lets PNG diversify reserves beyond petrodollar dependency. Crucially, it avoids the abrupt kina devaluation that businesses fear, fitting BPNG's preferred strategy of gradual currency adjustments.
Yet hurdles remain. The yuan's capital controls limit its use beyond China, potentially complicating trade with other partners, while closer RMB ties could strain relations with Australia and the IMF, key reform backers. This points to a measured rollout via pilot programs in priority exports.
For PNG businesses, this opens doors to cost-efficient China deals but demands vigilance on diversification. Early pilots could emerge by mid-2026, reshaping the Pacific trade landscape.
Photo: ABC News
