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Hong Kong, China Renew Currency Swap Agreement

by Mary Swire, LawAndTax-News.com, Hong Kong

25 November 2011


It has been announced that the People's Bank of China (PBoC) and the Hong Kong Monetary Authority (HKMA) have signed a renewed currency swap agreement for a term of another three years, with its size expanded to RMB400bn (USD63bn).

The new agreement doubled and extended the RMB200bn currency swap agreement signed on January 20, 2009, and Hong Kong’s Financial Secretary, John C Tsang, explained that: "The renewal of the currency swap agreement and the expansion of its size will allow more flexibility for the development of RMB business in Hong Kong. It is also conducive to the strengthening of Hong Kong's status as an offshore RMB business centre."

When signing the currency swap agreement, the Chief Executive of the HKMA, Norman Chan, added: "With strong support from the Central Government and the Mainland authorities, the development of RMB business in Hong Kong has made very encouraging progress over the past year. The renewal and expansion of the currency swap agreement between the HKMA and the PBoC is crucial in helping us to provide liquidity, when necessary, to maintain the stability of the offshore RMB market in Hong Kong."

During the first three quarters of this year, RMB deposits in Hong Kong nearly doubled to RMB622bn, while RMB trade settlement conducted through banks in Hong Kong amounted to over RMB1.3 trillion.

In October 2010, the HKMA activated the swap for RMB20bn to support RMB trade settlement in Hong Kong, thereby facilitating steady development of the business.

TAGS: investment | economics | business | law | China | offshore | agreements | Hong Kong | currency | trade

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