OREANDA-NEWS. July 10, 2014. The PBC used 400 million won which was made available to the Chinese side in the China-ROK bilateral currency swap arrangement to support trade financing for the corporate sector.

This is the first time that the PBC uses the funds received from the other side in a bilateral local currency swap arrangement. The PBC has lent the won-denominated fund to commercial banks for them to provide trade financing loans to support the payment for imports of goods and service from the Republic of Korea.

China and the Republic of Korea have close economic and trade ties. In 2013, the bilateral trade volume reached USD274.2 billion. Since the signing of bilateral local currency swap agreement, the Bank of Korea have used yuan-denominated funds for several times. The use of won funds by PBC is expected to help elevate cooperation under the bilateral local currency swap agreement to a new stage. The provision of bilateral local currency swap funds by monetary authorities to commercial banks to support trade financing will help boost bilateral financial cooperation, reduce the financing and exchange costs for the corporate sectors, and promote bilateral trade.

Starting from 2009, the PBC has signed 23 bilateral local currency swap agreements with total volume of the swap facilities exceeding 2.5 trillion yuan. Compared with the currency swap agreements between advanced economies designed to address a crisis, the local currency swap agreements the PBC has signed with other monetary authorities are intended for the twin goals of maintaining regional financial stability and promoting bilateral trade and investment. Going forward, the PBC will work closely with the Bank of Korea and other monetary authorities to tap the role of local currency swap arrangements and expand the use of local currencies in trade and investment to promote the development of bilateral trade and investment.