Are China’s currency swap deals a positive indication of renminbi growth?
$30b currency swap deal signed by China and Brazil is expected to provide trade opportunities for Brazilian banks, while expanding use of Rmb. June 28, 2012 | Baron LaudermilkChina and Brazil recently signed a preliminary deal to establish a currency swap that will enable both countries to mutually tap their respective central banks for up to $30 billion. This represents the third largest currency swap China has participated in, following the $31 billion currency swap deals with Australia and Hong Kong. Figure 1. China’s currency swaps: value, date, and period of time The currency swap was part of a major bilateral trade deal between two big emerging powers, and was announced at the United Nations Conference on Sustainable Development (Rio+), after meetings between Brazilian president Dilma Rousseff and Chinese premier Wen Jiabao. In a speech following both countries’ inking of the 10-year deal, Brazil’s finance minister Guido Mantega said that the agreement was also aimed at expanding investments between both nations, particularly exports of Brazilian manufactured goods to China. Mantega stated that the currency swap agreement “will allow the countries to boost financial reserves, which is useful at a time of financial stress.” Commenting on the 2008 global economy crisis, Mantega noted how trade activities were affected as a result of a global liquidity crunch, a predicament that both China and Brazil hoped to avoid in the future. He added that although the swap deal would not be formalised until the following weeks, it will be the first step in a reciprocal financial cooperation that could eventually draw in other major emerging market countries. With China accounting for nearly 20% of Brazilian exports, including iron ore, oil and soy, the agreement will provide a major boost to trade between Brazil and China. China’s recent initiative to enhance economic activity in the face of weak global economy should also open the door to further exports from Brazil. Banks in Brazil belie... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: China, Government Finance, Rmb, Trade Finance, Transaction BankingChina,Government Finance,Rmb,Trade Finance,Transaction Banking, China,Government Finance,Rmb,Trade Finance,Transaction Banking, , Capital Marketscapital, Capital Markets, Keywords:Brazil, Dilma Rousseff, Guido Mantega, Wen Jiabao, JP Morgan, David Koh, DBS Bank, Chris Leung, Donghyun Park, ADB Brazil, Dilma Rousseff, Guido Mantega, Wen Jiabao, JP Morgan, David Koh, DBS Bank, Chris Leung, Donghyun Park, ADB
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