The Bank of England and the People’s Bank of China have signed a three-year agreement worth 200bn Chinese Yuan, or £21bn, to establish a sterling/renminbi currency swap to promote trade between the two countries.
The deal, which was first agreed in February 2013, will also support financial stability in the UK.
Mervyn King, the Governor of the Bank of England, said: “It is a testament to the outstanding working relationships between the Bank of England and the People’s Bank of China (PBoC) that this swap line has now been signed.
“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. On behalf of the Bank, I am grateful to Governor Zhou and the staff at the PBoC, with whom it has been a pleasure to work.”
The deal will also support the UK Treasury’s plans to make London as a centre for the renminbi (RMB). The City of London initiative aims to provide leadership to the financial markets on the technical, infrastructure and regulatory issues for the development of the RMB product market in London.
China has also signed similar swap deals with Brazil, Japan, Australia and Hong Kong in the recent times to push its currency across global markets.