Currency Swap Agreement With China

Bilateral trade between China and the European Union has already resulted in total trade of $337.99 billion. By 2020, the two countries also expect a broader investment agreement between the EU and China. This investment agreement, which began in 2013, aims to give both China and European countries free access to markets. A similar situation followed in Argentina in 2014. Faced with extreme peso inflation and on the brink of an economic crisis, the nation has not been able to obtain US dollars, which has prevented importers from buying vital consumer goods. Argentina relied on its BSA with China, but, like Pakistan, instead of using it to facilitate trade between the two countries, the RMB was instead part of Argentina`s dual approach to introducing the USD into its domestic economy. Over time, this will ultimately reduce the possibilities of further introduction of RMB due to illiquidity in the market. If, in theory, Pakistan has a good incentive to continue using the RMB for cross-border trade, Pakistan`s central bank could use its RMB line of credit to exchange Pakistani rupees with the People`s Bank of China for RMB at an interest rate imposed by the swap agreement. These swap lines have never really been used. Even during the financial crisis, when Korea obtained up to $16.4 billion from its swap line with the Federal Reserve, neither Korea nor any other country that was party to these agreements used it to obtain foreign exchange. . .

.