In September, the People's Bank of China renewed bilateral currency swap agreements with the European Central Bank, the Swiss National Bank, and the Hungarian Central Bank; On August 18th, renewed the bilateral currency swap agreement with the Bank of Thailand; On May 13th, the People's Bank of China renewed its bilateral currency swap agreement with the Brazilian central bank... In recent years, the People's Bank of China has continued to deepen its foreign monetary and financial cooperation and steadily promoted bilateral currency swaps. According to statistics, the People's Bank of China has signed (including renewing) bilateral currency swap agreements with 8 foreign central banks this year. What is currency swap? What is the current situation of currency swap in our country? What impact will the increasing number of currency swap agreements have on economic development? In response to issues of social concern, the reporter interviewed Dong Ximiao, Deputy Director of the Shanghai Finance and Development Laboratory and Chief Researcher of the China Merchants Association. Q: What is currency swap? Why conduct currency swap? Answer: Bilateral currency swap refers to a secured financing arrangement established by the central banks (monetary authorities) of two countries (regions) on the basis of mutual trust, in which one party pledges its own currency to obtain the equivalent currency of the other party. For ease of understanding, we can imagine currency swaps as a "currency credit card" opened between central banks. For example, after the signing of the currency swap agreement between China and Europe, when European banks need RMB to pay for imported goods from China, the European Central Bank can use this "credit card" to exchange RMB at the real-time exchange rate from the People's Bank of China. After maturity, both parties can exchange the currency back at the original exchange rate and pay a small amount of interest. Bilateral currency swaps play a positive role in maintaining financial stability, providing liquidity support, and supporting bilateral trade and investment. In the past, Chinese companies conducting business overseas generally needed to first convert Chinese yuan into US dollars, and then convert US dollars into the other party's currency. Exchange rate fluctuations may have an impact on profits and require significant transaction fees. With currency swap, both parties can settle their business directly in their own currency, which is both convenient and free from the impact of fluctuations in the US dollar exchange rate. Q: What progress has been made in China's currency swap agreements in recent years? Answer: Since the launch of the local currency swap, the "circle of friends" of the RMB has been steadily expanding and deepening. From a scope perspective, as of September 30th this year, the People's Bank of China has signed effective bilateral currency swap agreements with central banks or monetary authorities of 32 countries and regions, covering major economies in Asia, Europe, Africa, the Americas, and Oceania, as well as numerous emerging market countries. In terms of scale, the total size of the local currency swap agreement is about 4.5 trillion yuan, providing stable RMB liquidity for the world. Q: What promoting effects can currency swaps bring to economic development? Answer: Currency swaps can promote the facilitation of cross-border trade and investment, and play an important role in promoting international economic and trade development. Taking the currency swap agreement between the People's Bank of China and the Brazilian central bank as an example, in 2013, the two countries signed their first bilateral currency swap agreement, with a RMB swap fund size of 190 billion yuan. In recent years, the economic and trade relations between China and Pakistan have become increasingly close. China has maintained Brazil's largest trading partner status for 15 consecutive years, and Brazil is also China's largest trading partner in Latin America. This year, both sides renewed the bilateral currency swap agreement, which will help deepen trade exchanges between the two countries, enhance market confidence, and maintain regional and global financial stability. Q: What impact will currency swaps have on enterprise production? Answer: For enterprises that produce and operate overseas, when doing import and export trade, they can apply to local banks to obtain local currency funds under the exchange item, directly quote and settle with customers in RMB or the other party's local currency, lock in costs and profits, and not be affected by fluctuations in the US dollar exchange rate, making production and operation more stable. Enterprises can achieve more accurate pricing through this, which is beneficial for long-term planning of operations and enhancing international market competitiveness. Q: What does the continuous expansion of the scale and scope of local currency swaps mean for the Chinese yuan? Answer: The scale and scope of local currency swaps continue to expand, and more countries and regions are willing to hold and use the renminbi, which means that the international recognition of the renminbi has increased. In the current international situation, currency swaps have become an important component of the global financial safety net, enhancing the financial autonomy and stability of countries. In the future, with the improvement of bilateral monetary cooperation and mutual trust between the People's Bank of China and central banks (monetary authorities) of other countries (regions), the internationalization process of the RMB will steadily and solidly advance. (New Society)