China, HK Agree to Currency-Swap Deal

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Jan. 21 – Hong Kong and Mainland China has agreed to currency-swap deal as part of the central government’s efforts to help the economic development of the territory.

The deal is expected to strengthen Hong Kong’s role as an international finance center and will provide liquidity support worth HKD227 billion or about US$29.3 billion.

The Monetary Authority of Hong Kong (HKMA) said that People’s Bank of China could provide short-term liquidity to Hong Kong banks operating in the mainland as well as Hong Kong operations of mainland banks.

The agreement is valid for three years with an option to extend upon agreement.

“The currency-swap deal is multipurpose,” HKMA Chief Executive
Joseph Yam told Dow Jones, after signing the agreement with China central-bank Gov. Zhou Xiaochuan.

The pact should increase financial stability in the region and help develop yuan-denominated trade transactions the two.

“The establishment of a currency swap arrangement will help address contingent needs and maintain financial stability,” Yam added. “It will also contribute to the development of a mutually assisting, complementary and interactive relationship between the financial systems of the Chinese mainland and Hong Kong.”