People's Bank of China and European Central Bank Extend 350 Billion Yuan Currency Swap Agreement for 3 Years
Chinese Media Report EU Political Decoupling Amid Economic Cooperation with China
[Asia Economy Senior Reporter Cho Young-shin] Amid the turmoil in various countries' currencies caused by the King Dollar (ultra-strong dollar), China and the European Union (EU) have signed a currency swap agreement.
According to Chinese media including the official Xinhua News Agency on the 11th, the People's Bank of China, the central bank of China, has extended the currency swap agreement with the European Central Bank (ECB) for three years. The agreed contract amount between the two sides is 350 billion yuan (45 billion euros, approximately 70 trillion KRW), the same scale as before. As of the end of September, China's foreign exchange reserves stood at 3.029 trillion dollars (4,328 trillion KRW).
China had previously signed currency swap agreements with major countries such as Canada (200 billion yuan, 5 years) in January last year, the United Kingdom (350 billion yuan, 5 years) in November last year, and Indonesia (250 billion yuan, 3 years) in January this year.
The People's Bank of China self-assessed that this extension of the currency swap agreement will further strengthen financial cooperation between China and Europe and help activate trade and investment.
Professor Dong Dengxin of Wuhan University’s Financial Research Institute said, "In a situation where the ultra-strong dollar is shaking the value of currencies worldwide, China and the EU have signed a currency swap agreement," adding, "This agreement will reduce costs and risks arising from exchange rate fluctuations."
Huanqiu Shibao evaluated the currency swap agreement with the ECB as reflecting economic interactions such as investment and trade between China and Europe. The media explained that although the European political sphere superficially aligns with the US on China’s economic decoupling, it recognizes that trade and investment with China benefit Europe. It emphasized the significance of this currency swap agreement by stating that China is Europe’s ladder for development, and Europe must climb this ladder called China to achieve greater progress.
Meanwhile, the People's Bank of China noted that after the yuan exchange rate exceeded 7 yuan per dollar recently, it has fallen again and stabilized, warning against currency speculation. It also pointed out that the US Federal Reserve’s (Fed) interest rate hike policy has been somewhat pre-reflected in the foreign exchange market.
Professor Xi Junyang of Shanghai University of Finance and Economics said, "China’s trade surplus in September was 433 billion yuan, higher than the previous month’s 376 billion yuan," adding, "China’s economic fundamentals will support the stability of the yuan."
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