China, ROK central banks sign currency-swap agreement

The central banks of China and the Republic of Korea (ROK) signed an agreement on Friday to expand their currency swap, which involved 180 billion yuan (26.3 billion U.S. dollars), China's central bank said.

The agreement set an upper transaction limit of 180 billion yuan or 38 trillion Korean won (about 28 billion U.S. dollars), the People's Bank of China (PBOC, central bank) said on its website.

The PBOC said the three-year agreement could be extended by mutual agreement.

The swap agreement is intended to provide short-term liquidity support to banking systems in both economies and support bilateral trade, it said.

The two sides also agreed to discuss the possibility, and the proportion, of changing the swap currencies into forex reserves, it said.

The PBOC said the swap agreement supplemented an earlier one under the Chiang Mai Initiative, which was signed in that Thai city in May 2000.

The initiative aimed to set up a network of currency swap agreements among the 10 members of the Association of Southeast Asian Nations and China, Japan and the ROK, which was designed to stabilize currencies in time of financial crises.