Central banks of NZ and China set up RMB facility

Monday 18th April 2011 1 Comment

New Zealand's central bank has put in place a currency swap facility with China's central bank to help trade and provide options when financial markets are disrupted.

The People's Bank of China (PBOC) and the Reserve Bank of New Zealand said they have established a reciprocal 25 billion Chinese Renminbi (RMB) (NZ$5 billion) swap facility to support the settlement in RMB of trade transactions between New Zealand and Chinese businesses.

The facility is for three years and can be extended if both parties agree. Eight other countries, mainly in Asia, have swap facilities with the PBOC.

The facility gives the Reserve Bank the capacity to borrow RMB when financial market disruption makes it difficult for businesses to access RMB to settle transactions with Chinese businesses.

"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-New Zealand relationship," Reserve Bank deputy governor Grant Spencer said.

NZPA

Comments from our readers

On 18 April 2011 at 7:37 pm Brendan Swift said:

This has to be all good. Not only are we "joined at the hip" to the worlds second largest economy, we now have a tie in to probably the worlds fastest growing.