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Currency swap with Hong Kong signed

By Zheng Lifei (China Daily)
Updated: 2009-01-21 08:01

The mainland on Tuesday inked a 200-billion-yuan currency swap deal with Hong Kong, the central bank said, in a move to promote financial stability and economic growth in the special administrative region.

The deal, which will last for three years and can be extended upon the agreement of the two sides, "will enhance outsiders' confidence in and promote Hong Kong's financial stability", the People's Bank of China said.

"It will also promote the development of the yuan-denominated trade between the two sides," it added.

Related readings:  Chinese mainland, HK sign currency swap agreement  Agreement reached on currency swap deal  Nations in currency swap deal  China, ROK central banks sign currency-swap deal

The deal, signed between People's Bank of China and Hong Kong Monetary Authority, is part of the 14 support measures Premier Wen Jiabao promised to the special administrative region in December to help the city cope with the ongoing global financial turmoil.

"It will definitely bolster investors' confidence in Hong Kong as it will ensure financial stability and meet the city's cash flow needs," said Dong Xian'an, senior economist, Southwest Securities.

"The swap deal is part of the concerted efforts with regional economies to weather the financial crisis," Dong said, citing a similar pact China and South Korea inked in December.

A currency swap is a foreign exchange agreement between two parties to exchange a given amount of one currency for another and, after a specified period of time, give back the original amounts swapped.