The People's Bank of China has signed agreements with 32 countries and regions.

What is the role of local currency swaps on my country's economy (Policy Interpretation¡¤Q & A)

In September, the People's Bank of China with the European Central Bank, the Central Bank of Switzerland and the Central Bank of Hungary renewed the bilateral currency exchange agreement; August 18, renewed the bilateral currency exchange agreement with the Bank of Thailand; May 13, renewed the bilateral currency exchange agreement with the Brazilian central bank ... In recent years, the People's Bank of China continued to deepen foreign monetary financial cooperation and steadily promote bilateral currency exchange.

What is currency exchange? what is the current situation of currency exchange in China? what impact will the increasing number of currency exchange agreements have on economic development?

Q: What is currency exchange and why do we exchange currency?

Answer: Bilateral local currency swap refers to a secured financing arrangement established by the central banks (monetary authorities) of two countries (regions) on the basis of mutual trust. One party uses the local currency as a pledge to obtain the equivalent currency of the other party.

For ease of understanding, we can imagine a local currency swap as a "currency credit card" opened between central banks. For example, after China and the EU signed a local currency swap agreement, when European banks need RMB to pay companies for imports from China, the European Central Bank can use this "credit card" to exchange RMB from the People's Bank of China at the real-time exchange rate. After the expiration, both parties will exchange currency back at the original exchange rate and pay a small amount of interest.

Bilateral currency exchange plays a positive role inining financial stability, providing liquidity support, supporting bilateral trade and investment in many ways. Previously Chinese enterprises had to do business abroad, generally need to first exchange the RMB for the U.S. dollar and then exchange the U.S. dollar for each other's currency. Exchange rate fluctuations may have an impact on profits and have to pay a lot of procedural fees. With the exchange of the currency, the two sides do business directly with their own currency, convenient and free from the influence of the dollar exchange rate fluctuations.

Q: What progress has been made in our currency exchange agreements in recent years?

A: Since the start of the currency exchange, the ¡°friends circle¡± of the RMB has been steadily expanding and deepening. From the scope, as of September 30, this year, the People¡¯s Bank of China has signed effective bilateral currency exchange agreements with central banks or monetary authorities in 32 countries and regions, covering major economies in Asia, Europe, Africa, America and Oceania and many emerging market countries. From the scale, the total scale of the currency exchange agreement is about RMB 4.5 trillion, providing stable currency liquidity for the world.

Q: What role can currency exchange play in promoting economic development?

A: The exchange of local currencies can promote the facilitation of cross-border trade investment, and has an important driving role in the development of international economic and trade.

Take the local currency swap agreement between the People's Bank of China and the Central Bank of Brazil as an example. In 2013, the two countries signed a bilateral local currency swap agreement for the first time, with a RMB swap fund of 190 billion yuan. In recent years, China-Pakistan economic and trade relations have become increasingly close. China has maintained its status as Brazil's largest trading partner for 15 consecutive years. Brazil is also China's largest trading partner in Latin America. This year, the two sides renewed the bilateral currency swap agreement, which will help deepen trade exchanges between the two countries, enhance market confidence, and maintain regional and global financial stability.

Q: What impact will local currency swap have on enterprise production?

Answer: For enterprises that produce and operate overseas, when doing import and export trade, they can apply to local banks to obtain local currency funds under swaps, and directly quote and settle with customers in RMB or the other party's local currency to lock in costs and profits, and are not affected by fluctuations in the US dollar exchange rate. Impact, production and operation are more stable. By doing this, enterprises can achieve more precise pricing, which is conducive to long-term planning of operations and enhancing competitiveness in the international market.

Q: What does the ever-expanding scale and scope of currency exchange mean for the RMB?

A: The scale and scope of local currency swaps are constantly expanding, and more countries and regions are willing to hold and use RMB, which means that the international recognition of RMB has increased.

Under the current international situation, currency exchange has become an important part of the global financial security network, enhancing the financial autonomy and stability of all countries.In the future, as the People's Bank of China and other countries (regions) central banks (monetary authorities) improve the level of bilateral monetary cooperation and mutual trust, the internationalization process of the RMB will steadily and steadily move forward.