Even though I have not said much about China's bilateral swap agreements in recent months, I have been following the development with interest. My last count revealed that China had entered into about 20 such swap agreements. Everybody understands that swap agreements bypasses the need to convert payables into dollars from one currency and then reconvert the calculated dollars into the other currency--or pay the bill in dollar and not in either local currency. By doing able to deal directly, the two trading partners can skip having to hold dollars in their reserve to pay bills.
Experts on international monetary policy also say that the swap agreement is a way for China to gradually open the door for the renminbi to become an internationally accepted reserve currency, even before the yuan becomes freely convertible.
The latest news indicate that China has also signed multiple currency swap agreements totaling 2.9 trillion yuan (472 billion U.S. dollars) with 26 overseas monetary authorities. "Monetary authorities" rather than countries because the list includes Hong Kong and Taiwan.
The main reason for the news bulletin was to announce direct trading of the renminbi with the Singapore dollar beginning October 27, 2014. The Sing dollar is the latest to be added to the major currencies that China can do onshore trading. Others are U.S. dollar, the euro, British sterling, Japanese yen, Australian dollar, New Zealand dollar, Malaysian ringgit and Russian ruble.
This move is said to help Singapore become a "renminbi offshore center." The same article goes on to say that the PBOC has also authorized offshore renminbi clearing and settlement arrangements in Singapore, London, Frankfurt, Seoul, Paris and Luxembourg, as well as Taiwan, Hong Kong and Macao. The article from official source in China does not clarify the difference between clearing and settlement and just plain center.
The article also said China's foreign exchange reserve as of June 2014 totaled $3.89 trillion.
Reuters recently reviewed China's possible strategy on internationalization of the renminbi that I thought was rather informative. The article was specifically referring to Canada and Middle East as next likely offshore centers, but the discussion was generally useful in understanding what China is doing. On November 8, China and Canada announced swap agreement up to 200 billion yuan for three years and Toronto will be the first city in North America to clear renminbi based transactions.
Another report indicated that Qatar is the 24th country to enter a swap agreement with China. In this case, the swap would enable the use the renminbi for purchase of oil in lieu of the dollar.
A comprehensive discussion on the move to internationalize the renminbi was recently published on the blog for China's central TV. This post indicate that China has swap agreements in place with 29 monetary authorities. Even though the renminbi is not yet freely convertible and far from becoming a reserve currency like the dollar, the growth in the use of the yuan for trade settlement has leaped more than a thousand fold from 2009 to 2013, from 3.58 billion yuan in '09 to 4.63 trillion yuan in '13. The amount in first three quarters of '14 has already exceeded the total for 2013.
Experts on international monetary policy also say that the swap agreement is a way for China to gradually open the door for the renminbi to become an internationally accepted reserve currency, even before the yuan becomes freely convertible.
The latest news indicate that China has also signed multiple currency swap agreements totaling 2.9 trillion yuan (472 billion U.S. dollars) with 26 overseas monetary authorities. "Monetary authorities" rather than countries because the list includes Hong Kong and Taiwan.
The main reason for the news bulletin was to announce direct trading of the renminbi with the Singapore dollar beginning October 27, 2014. The Sing dollar is the latest to be added to the major currencies that China can do onshore trading. Others are U.S. dollar, the euro, British sterling, Japanese yen, Australian dollar, New Zealand dollar, Malaysian ringgit and Russian ruble.
This move is said to help Singapore become a "renminbi offshore center." The same article goes on to say that the PBOC has also authorized offshore renminbi clearing and settlement arrangements in Singapore, London, Frankfurt, Seoul, Paris and Luxembourg, as well as Taiwan, Hong Kong and Macao. The article from official source in China does not clarify the difference between clearing and settlement and just plain center.
The article also said China's foreign exchange reserve as of June 2014 totaled $3.89 trillion.
Reuters recently reviewed China's possible strategy on internationalization of the renminbi that I thought was rather informative. The article was specifically referring to Canada and Middle East as next likely offshore centers, but the discussion was generally useful in understanding what China is doing. On November 8, China and Canada announced swap agreement up to 200 billion yuan for three years and Toronto will be the first city in North America to clear renminbi based transactions.
Another report indicated that Qatar is the 24th country to enter a swap agreement with China. In this case, the swap would enable the use the renminbi for purchase of oil in lieu of the dollar.
A comprehensive discussion on the move to internationalize the renminbi was recently published on the blog for China's central TV. This post indicate that China has swap agreements in place with 29 monetary authorities. Even though the renminbi is not yet freely convertible and far from becoming a reserve currency like the dollar, the growth in the use of the yuan for trade settlement has leaped more than a thousand fold from 2009 to 2013, from 3.58 billion yuan in '09 to 4.63 trillion yuan in '13. The amount in first three quarters of '14 has already exceeded the total for 2013.
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