PBOC Enters Its First Standing Swap Agreement with Hong Kong Monetary Authority

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The Chinese central bank has just entered it first standing swap arrangement with the Hong Kong Monetary Authority (HKMA).

The People’s Bank of China (PBOC) and HKMA recently executed an agreement to upgrade the monetary swap arrangement first entered in 2009 to a standing swap arrangement. Under the move the swap volume will increase from 500 billion yuan/ 590 billion Hong Kong dollars to 800 billion yuan/ 940 billion Hong Kong dollars.

PBOC has reportedly executed bilateral currency swap agreements with the central banks or monetary authorities of around 40 different countries.

The agreement recently entered with HKMA is PBOC’s first standing swap agreement, with no requirement for regular extension.

PBOC officials said the agreement will further deepen financial cooperation between the mainland and Hong Kong, as well as better support the development of Hong Kong as an international financial centre, and drive the stable development of Hong Kong’s offshore market for the renminbi.

“PBOC’s execution of the standing swap agreement with Hong Kong is mainly to satisfy the deeper level cooperation and development needs of the mainland and Hong Kong,” said a PBOC official.

“In recent years the mainland and Hong King have continually deepened financial cooperation, with capital market connections including Shanghai-Hong Kong Connect, Shenzhen-Hong Kong Connect, Bond Connect, and Cross-border Wealth Management Connect.

“With the steady development of Hong Kong’s offshore renminbi market, Hong Kong has become a key settlement centre, funds centre and product centre for the offshore renminbi.”