The People's Bank of China and the National Bank of Cambodia on Tuesday signed a memorandum of cooperation on establishing a yuan clearing arrangement in Cambodia, China's central bank said, furthering economic cooperation between the two countries.
China has been trying to boost the yuan globally since 2009 to reduce reliance on the U.S. dollar in trade and investment settlements and challenge the greenback's role as the world's major reserve currency.
Over the past two years, Beijing has signed similar yuan clearing deals with Brazil, Kazakhstan, Laos, and Pakistan.
China has also signed an estimated 40 currency swap agreements, predominantly with emerging markets, which analysts say function as a credit line for these countries to draw on. China and Saudi Arabia on Monday announced they signed a local currency swap agreement worth $6.93 billion.
The yuan clearing agreement should enable Cambodian firms to more easily conduct financial transactions with China in yuan.
China's central bank governor Pan Gongsheng and his Cambodian counterpart Chea Serey also discussed financial cooperation between the countries, a statement said.
Two-way trade between China and Cambodia reached $16.3 billion in 2022, according to United Nations COMTRADE data.
Knitted or crocheted fabric goods constituted the biggest Chinese export to the Southeast Asian nation last year, according to COMTRADE, followed by electronic equipment and machinery for plastics manufacturing.
Cambodia, which is among Asia's poorest countries, has been an important ally to China in recent years and has been accused of giving it de facto veto power in Southeast Asia's ASEAN grouping consensus-based decision making process in return for economic support.
China and Cambodia agreed to a free trade agreement in 2020 that was sealed in just one year and saw both countries cut duties on agricultural products and improve market access in their respective tourism industries.
The trade deal gave Cambodia a much needed economic cushion, after the European Union in 2019 applied punitive trade measures against it over human rights concerns.