02-10-2009 11:35

China's central bank has signed a bilateral currency swap agreement with its Malaysian counterpart. This is the bank's third currency swap agreement in two months.

China's central bank has signed a bilateral currency swap agreement with its Malaysian counterpart.
China's central bank has signed a bilateral
currency swap agreement with its Malaysian 

The arrangement will allow the two banks to swap 80 billion yuan, or 40 billion Ringgit over three years, and could be extended. The People's Bank of China said the deal aimed to promote bilateral trade and investment, and boost the economic development of the two countries.

Besides the currency swap agreement, China also signed agreements with eight neighboring countries and regions, allowing local currencies to be used in trade settlement. Experts say most international trade deals are settled with US dollar, which is now fluctuating severely due to the global financial crisis. This will cause losses for traders. In comparison, the yuan is more stable, and can help reduce settlement risks.

Zhao Xijun, professor of Renmin University, says, "the recent agreement has emphasized local currency swaps. It has given more prominence to the RMB, which is a comparatively stable currency."

Experts also indicate that as the US dollar is fluctuating due to the financial crisis. there would be more chance for the yuan to improve its international status.

Zhao Xijun says, "bilateral currency swap can help improve RMB's international influence, and promote the use of the yuan in international finance and trade."

Previously, the People's Bank of China signed such agreements with South Korea and Hong Kong SAR.

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Editor:Qin Yongjing