À̹ÌÁö È®´ë South Korea and China on Thursday extended their currency swap agreement by another five years, with the ceiling bumped up from $56 billion to $59 billion.
The Ministry of Economy and Finance said on Thursday that the Bank of Korea and the People¡¯s Bank of China signed a deal to renew their bilateral currency swap agreement by another five years until October 10, 2025. The size of the swap deal has also been expanded to $59 billion – the largest-ever signed by China with another country along with Hong Kong.
China is in a 350 billion yuan currency swap deal with European Central Bank and 350 billion yuan deal with the United Kingdom.
A currency swap deal involves a country to exchange its currency into another country¡¯s currency or dollars and vice versa at a time of emergency such as financial crisis.
¡°The deal is significant as an extension in the agreement period will minimize uncertainties that can erupt upon expiration,¡± the ministry said. ¡°The deal is aimed at improving bilateral trade, stabilize financial market, and provide financial institutions entering each other¡¯s country liquidity.¡±
¡°It will contribute to financial stabilization as it guarantees trade costs to be paid with its own currency at a time when the international financial market remains volatile,¡± it added.
À̹ÌÁö È®´ë In addition to the $4 billion currency swap deal with China in April, 2009, under the Chiang Mai Initiative, the central banks of Korea and China entered into a $26 billion won-yuan swap deal.
In October, 2011, Korea and China doubled the size of the deal to $56 billion as a preemptive move against European financial crisis and decided to extend expiry to October, 2017, during Korea-China summit in June, 2013. The deal was extended by three years until this year.
By Lee Eun-joo
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