The People’s Bank of China (PBOC) and the Reserve Bank of New Zealand today announced the establishment of a reciprocal currency arrangement (swap line) to support the settlement in Chinese Renminbi (RMB) of trade transactions between New Zealand and Chinese businesses.
The size of the swap facility is RMB 25 billion (NZD 5 billion) and has a three year maturity which may be extended if both parties agree. The facility gives the Reserve Bank the capacity to borrow RMB for use in rare situations where financial market disruption makes it difficult for businesses to access RMB to settle transactions with Chinese businesses.
Reserve Bank Deputy Governor Grant Spencer said the arrangement followed on from recent actions by the PBOC to facilitate the settlement of transactions conducted by firms in RMB. Eight other countries, mainly in Asia, have swap facilities in place with the PBOC.
“While there is no need to use the facility right now, it is useful to have this capacity if markets were ever to become dysfunctional. In addition the signing of this swap line contributes to building the China-NZ relationship,” Mr Spencer said.