Korea promotes the signing of a regular currency swap agreement with China

As an important measure to prevent the outbreak of the foreign exchange crisis, South Korea is advancing the signing of a regular currency swap agreement with China, which is also conducive to the internationalization of the renminbi.

Citing the relevant sources of the Korean government, they said: “The signing of a regular currency swap agreement with China can significantly reduce the risk of a financial crisis. As the first phase of the signing of the currency swap agreement, South Korea proposed to the Chinese that the two countries have already The exchanged currency is used for the settlement of trade between the two countries."

The method of swapping currency for trade settlement is that the Bank of Korea provides the renminbi to commercial banks, commercial banks lend the renminbi to enterprises, and the companies use them for the settlement of trade with China. The South Korean government believes that this plan also benefits the RMB as an international reserve currency.

If the above stages are successfully passed, South Korea hopes to eventually establish a regular currency swap mechanism between South Korea and China. The report said that South Korea had considered establishing a similar mechanism with the United States and Japan, but ultimately chose China for feasibility reasons.

A currency swap agreement is an agreement to exchange the national currency or the U.S. dollar with the national currency in the event of a shortage of foreign exchange. If South Korea and China sign a regular currency swap agreement, the two countries can exchange currencies indefinitely. In December 2008, South Korea signed a currency swap agreement with China worth 26 billion U.S. dollars (about 180 billion U.S. dollars at that time), which is valid until April 2012.