China signs large swap line with EU
2013-10-11 11:57:10
China accelerated plans to internationalize its currency on Thursday by agreeing to swap euros and yuan with the European Central Bank (ECB) in a deal that is set to be China's second largest ever.
The bilateral currency swap agreement between the People's Bank of China (PBC) and the ECB is valid for three years and has a maximum value of 350 billion yuan ($57.2 billion), according to a statement posted Thursday on the PBC's website.
The agreement aims to stimulate the yuan's use in overseas markets, facilitate bilateral trade and investment, as well as ensure the stability of financial markets, the statement said.
The deal is the latest in a string of currency swaps that China has created with other nations to promote the usage of the yuan in global commercial and financial transactions, with the ultimate goal of rivaling the US dollar as a reserve currency.
"The emphasis is on the yuan's internationalization," said Louis Kuijs, an RBS economist in Hong Kong.
He said currency swaps also provide central banks with additional liquidity in times of financial emergencies, though this function is of secondary purpose in China's swap agreements.
The swap deal with the ECB is China's second biggest with a foreign central bank, after a 360 billion yuan swap line with South Korea.
As China's second-largest trade partner, Europe is a natural destination for China in raising the yuan's profile.
The interest has been reciprocated by European nations such as Britain and Germany which both want to be the clearing center for the yuan in Europe.
The yuan is now the world's eighth most traded currency, financial services provider SWIFT said earlier this week.