Korea and China extended their won–yuan currency swap contract on the occasion of the Korea–China summit.
According to the Bank of Korea (BOK) on the 3rd, the BOK and the People's Bank of China signed a renewal of the won–yuan currency swap contract on the 1st. Bank of Korea Governor Rhee Chang-yong and Chinese Ambassador to Korea Dai Bing attended the signing ceremony, and Dai signed on behalf of People's Bank of China Governor Pan Gongsheng.
The Korea–China currency swap contract was signed on Oct. 2020 with a five-year maturity and a size of 400 billion yuan (70 trillion won) and ended on the 10th of last month. After continuing talks on re-extension, the contract was renewed on the occasion of the Korea–China summit held on the 1st. The size and term are the same as the previous contract.
The Bank of Korea (BOK) said, "The purpose of the contract is to promote bilateral trade, stabilize financial markets, and support liquidity for financial institutions operating in the other country," adding, "The renewal of the Korea–China currency swap contract is expected to contribute to promoting trade between the two countries and stabilizing regional financial markets."
The Korea–China currency swap was first signed in 2002 at $2 billion, and was extended every three years, expanding to $4 billion in 2005, $30 billion in 2008, and $56 billion in 2011. Even during periods of diplomatic tension, such as the THAAD issue, the two countries maintained the agreement, keeping a minimum "safety valve" for economic and financial cooperation.
In particular, among China's currency swap contracts with other countries, the Korea–China agreement is among the larger ones, along with Hong Kong (800 billion yuan). China currently has currency swaps in effect totaling 4.16 trillion yuan with 31 Central Bank or currency authorities.