Mongolia Central Bank to Sign Currency Swap Deal With China
BEIJING—The central bank of Mongolia said it will sign a currency swap agreement with the People's Bank of China, paving the way for more yuan-based trade settlements.
Mongolbank didn't disclose the amount or duration of the contract but said the deal would help ensure the stability of its local currency, according to a statement on its website dated May 3.
China has stepped up efforts to promote the yuan's use in cross-border trade and finance to reduce its reliance on the U.S. dollar in the wake of the global financial crisis.
The increased circulation of yuan offshore is also key to China's efforts to internationalize its currency.
In recent years, the People's Bank of China has established bilateral currency swap agreements with a number of central banks, including those of Hong Kong, South Korea, Malaysia, Indonesia, Belarus and Argentina.
Though the volume of yuan-denominated trade remains low, it is growing rapidly. About 7% of China's foreign trade in the first quarter was conducted using yuan, up from 0.5% a year earlier, according to data from the PBOC's quarterly monetary policy report released Tuesday.
The report "makes clear that the authorities see trade flows, not capital flows, as the main channel for (the yuan) to flow into offshore markets," ING economist Tim Condon wrote in a research note.
In 2009, Beijing began allowing exporters and importers in certain regions to use yuan to buy or sell goods abroad, and China's central bank will expand the trial to the whole nation this year, local media reported last month, citing a PBOC official.
Most yuan-based trade deals so far have involved Chinese companies using the Chinese currency to buy goods. Around 89% of yuan trade in the first quarter was accounted for by China's imports, according to data from the PBOC.
An official delegation led by China central bank Gov. Zhou Xiaochuan will visit Ulaanbaatar on Thursday, the Bank of Mongolia said.
The PBOC wasn't immediately available for comment.
--Jean Yung, Stefanie Qi and Aaron Back contributed to this article.
Mongolbank didn't disclose the amount or duration of the contract but said the deal would help ensure the stability of its local currency, according to a statement on its website dated May 3.
China has stepped up efforts to promote the yuan's use in cross-border trade and finance to reduce its reliance on the U.S. dollar in the wake of the global financial crisis.
The increased circulation of yuan offshore is also key to China's efforts to internationalize its currency.
In recent years, the People's Bank of China has established bilateral currency swap agreements with a number of central banks, including those of Hong Kong, South Korea, Malaysia, Indonesia, Belarus and Argentina.
Though the volume of yuan-denominated trade remains low, it is growing rapidly. About 7% of China's foreign trade in the first quarter was conducted using yuan, up from 0.5% a year earlier, according to data from the PBOC's quarterly monetary policy report released Tuesday.
The report "makes clear that the authorities see trade flows, not capital flows, as the main channel for (the yuan) to flow into offshore markets," ING economist Tim Condon wrote in a research note.
In 2009, Beijing began allowing exporters and importers in certain regions to use yuan to buy or sell goods abroad, and China's central bank will expand the trial to the whole nation this year, local media reported last month, citing a PBOC official.
Most yuan-based trade deals so far have involved Chinese companies using the Chinese currency to buy goods. Around 89% of yuan trade in the first quarter was accounted for by China's imports, according to data from the PBOC.
An official delegation led by China central bank Gov. Zhou Xiaochuan will visit Ulaanbaatar on Thursday, the Bank of Mongolia said.
The PBOC wasn't immediately available for comment.
--Jean Yung, Stefanie Qi and Aaron Back contributed to this article.
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