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HK inks currency swap deal to boost liquidity

CHINESE central bank and Hong Kong signed a 200-billion-yuan (US$29 billion) currency swap deal yesterday to bolster liquidity in the special administrative region.

The three-year deal gives the Hong Kong Monetary Authority access to the yuan whenever the SAR needs "short-term liquidity support," the People's Bank of China said yesterday.

Short-term liquidity support can also be provided to the mainland operations of Hong Kong banks and the Hong Kong operations of mainland banks.

The deal can also promote yuan-backed trade between the mainland and Hong Kong and strengthen confidence in Hong Kong's financial sustainability, the bank said.

The life of the deal can be extended with the agreement of both sides.

The deal is seen as a further strengthening of financial cooperation between the mainland and Hong Kong.

The Financial Secretary of Hong Kong John Tsang said the deal would further support Hong Kong's economic development and help maintain Hong Kong's status as an international financial center.

The central government last month said 14 measures would be undertaken to support Hong Kong's financial stability and economic development, including a currency swap agreement.

Hong Kong expects negative economic growth for the last quarter last year and the first half this year, Chief Executive Donald Tsang said earlier this week.

Whether the economy recovers thereafter hinges on the effectiveness of government measures around the world.

Hong Kong's economy slid into recession last year for the first time in five years as it contracted in the third quarter.


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