China printing LKR and other currencies at rapid pace
China is printing foreign currencies on a massive scale, with most of the demand coming from governments of countries in the ‘Belt and Road Initiative’, including Sri Lanka.
Chinese media reported that the China Banknote Printing and Minting Corporation’s money production plants across China were running at near full capacity to meet an unusually high quota set by the Chinese government this year.
China began printing foreign currencies only in 2015 by printing 100-rupee notes for Nepal, according to China Finance, a bi-monthly journal run by China’s central bank in May.
Since then the company had “seized the opportunities brought by the initiative” and “successfully won contracts for currency production projects in a number of countries including Thailand, Bangladesh, Sri Lanka, Malaysia, India, Brazil, and Poland,” it said.
The China Banknote Printing and Minting Corporation is a state-owned company, headquartered in Beijing, which is the world’s largest money printer by scale, with more than 18,000 employees, and 10 strictly guarded facilities.
Finance Ministry statistics released earlier this year showed that the Sri Lankan Government loses approximately Rs. 1.5 billion every year as the Central Bank of Sri Lanka (CBSL) buys currency notes from De La Rue Lanka Ltd., one of China Banknote Printing and Minting Corporation’s main competitors, at “twice the market price”.
In the absence of a competitive bidding process the price paid by the CB to the company is far above the comparative market price of similar products, although the product is far below the internationally popular security and quality standards, according to a document submitted to President Maithripala Sirisena.
De La Rue Lanka, based in Biyagama and employing over 300 persons, is a joint venture between De La Rue and the Sri Lankan Government, which has been in operation, producing Sri Lankan currency notes, since 1986.
Beijing has regarded money printing capability as being crucial to its national security amid fears its enemies could use fake notes to disrupt the economy and also in its efforts to increase its influence on the world economy and geopolitics.
A country must have considerable trust in the Chinese government to allow it to print its banknotes, as currency is a symbol of a nation’s sovereignty, and such an agreement helps build trust and even monetary alliances.
The main drawback of having money printed outside the country is the security risk. Seven years ago, during the downfall of Muammar Gaddafi in Libya, the British government seized nearly $1.5 billion worth of dinars printed by De La Rue, causing serious cash shortages that increased the pressure on the regime.