The Reserve Bank of Australia has signed a new bilateral local currency swap agreement with the People’s Bank of China (PBC). The agreement, which can be activated by either party, allows for the exchange of local currencies between the two central banks of up to A$40 billion or CNY 200 billion. It follows the initial swap agreement between the two central banks signed in 2012 and is for a further period of three years.
As with the initial agreement in 2012, the main purposes of this agreement are to support trade and investment between Australia and China, particularly in local-currency terms, and to strengthen bilateral financial cooperation. The agreement reflects the increasing opportunities available to settle trade between the two countries in Chinese renminbi (RMB) and to make RMB-denominated investments. Other recent initiatives between the two countries include the establishment of an official RMB clearing bank and the granting of a quota as part of the RMB Qualified Foreign Institutional Investor program in November 2014.
