Britain and China have signed an agreement to establish a reciprocal three ?year, sterling/renminbi (RMB) currency swap line.
The maximum value of the swap is RMB200 billion. The swap line may be used to promote bilateral trade between the two countries and to support domestic financial stability should market conditions warrant.
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The Bank of England said in January that it was open to a sterling/renminbi swap line, something British financiers have been asking for in order to strengthen London’s position as a centre for issuing bonds denominated in China’s currency.
The UK joins a group of over 20 countries to have such a currency swap agreement in place, most of which are key trading partners with China, such as Australia, Brazil and Japan. The deal is the first of its kind within Europe.
Commenting on the agreement, the Governor of the Bank of England said: "The establishment of a sterling/renminbi swap line will support UK domestic financial stability. In the unlikely event that a generalised shortage of offshore renminbi liquidity emerges, the bank will have the capability to facilitate renminbi liquidity to eligible institutions in the UK."
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