China, Switzerland in currency deal
Print Edition
THE central banks of China and Switzerland yesterday inked a bilateral currency swap deal worth 150 billion yuan (US$24 billion) to support trade between the two countries, while also boosting the global appeal of the yuan.
The swap deal allows the two central banks to purchase and repurchase each other’s currencies to replenish market liquidity over the next three years.
“The agreement aims to provide liquidity support for bilateral economic and trade exchanges and help maintain financial stability,” the People’s Bank of China said in a statement, adding that it would facilitate trade and investment between the two countries.
The Swiss National Bank has been granted a 15 billion yuan, or 2 billion Swiss franc, investment quota, part of which it can invest in forex reserves in the Chinese bond market.
The Swiss central bank applauded the currency swap agreement as “a key prerequisite for the development of a yuan market in Switzerland,” and the investment quota will “even further” diversify its foreign exchange reserves.
The currency deal was announced three weeks after a free trade agreement took effect between the two countries.
Under the agreement, up to 99.7 percent of Chinese exports to Switzerland and about 84.2 percent Swiss exports to China would be exempted from tariffs.
The People’s Bank of China now expects more companies to use the yuan to settle bilateral trade which could also enhance the yuan’s value.
China now has currency swap deals with 25 countries and regions including European Central Bank and the Bank of England.
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