SHANGHAI, June 13 -- The People's Bank of China, the Hong Kong Monetary Authority and Bank Indonesia signed a memorandum of understanding in Shanghai on Wednesday to establish a direct bilateral currency framework for the Indonesian rupiah and the offshore Chinese renminbi, formally removing the United States dollar from the centre of cross-border trade and investment settlement between Indonesia and Hong Kong. The agreement, brokered between the three central banks rather than between governments, is the most concrete piece of dedollarisation infrastructure that Asia has produced this year.

The mechanics are functional. The MoU commits the three authorities to operational guidelines, to the appointment of select banks as Appointed Cross...