Since the beginning of this year, the People's Bank of China has steadily promoted bilateral currency swaps. Recently, the People's Bank of China and the Bank of Korea renewed their bilateral currency swap agreement, with a swap scale of 400 billion yuan/70 trillion Korean won. The agreement is valid for five years and can be extended upon mutual agreement. In addition to the Bank of Korea, according to statistics, the People's Bank of China has also signed (including renewals) bilateral currency swap agreements with 9 central banks or monetary authorities, including the Central Bank of Iceland, the European Central Bank, the Swiss National Bank, and the Hungarian National Bank, this year. The so-called bilateral currency swap refers to an agreement signed by the central banks or monetary authorities of two countries or regions, agreeing that under certain conditions, either party can exchange a certain amount of currency for an equivalent amount of the other party's currency, which is used for bilateral trade and investment settlement or to provide short-term liquidity support for financial markets. After maturity, both parties exchange their currency back and pay corresponding interest. Wang Youxin, head of the Research Institute of Bank of China, told reporters that the bilateral currency swap between the People's Bank of China and overseas central banks or monetary authorities plays a positive role in many aspects: firstly, it is conducive to improving the convenience of bilateral cross-border trade settlement. Using local currency for trade settlement is beneficial in reducing dependence on third-party currencies in international trade activities, eliminating instability in foreign trade, and mitigating the impact of exchange rate fluctuations on cross-border trade and corporate finance. Secondly, it is conducive to promoting the development of RMB internationalization business. Bilateral currency swaps provide potential liquidity arrangements for overseas use of RMB, facilitating cross-border RMB settlement and investment and financing activities for enterprises, and promoting the willingness to use RMB. Thirdly, it is conducive to leveraging the role of the Renminbi in the international financial security network. By conducting currency swaps with China and joining the RMB liquidity international exchange network, emergency liquidity support for the RMB can be sought in the event of a liquidity crisis, thereby mitigating financial risks, stabilizing cross-border payments, and the financial system. The "Report on RMB Internationalization (2025)" recently released by the People's Bank of China shows that as of June 30, 2025, the People's Bank of China has signed bilateral currency swap agreements with central banks or monetary authorities of 43 countries and regions, including 32 effective agreements with a swap scale exceeding RMB 4.5 trillion. As of June 30, 2025, the actual balance of RMB used by foreign central banks (monetary authorities) was 80.67 billion yuan, and the actual balance of foreign currency swap funds used by the People's Bank of China was equivalent to RMB 380 million yuan. In recent years, the amount of RMB used under the bilateral currency swap mechanism has gradually increased, and market recognition has greatly improved. The usage scenarios have gradually expanded from the trade sector to investment and financing, which has played a positive role in promoting the cross-border use of RMB, stabilizing foreign economic and trade relations, and improving the international financial security network. ”Wang Youxin believes that in the future, we can innovate the financial product system, enhance the breadth and depth of the offshore RMB liquidity market, and provide more support for enterprises to obtain RMB liquidity and carry out investment and financing activities. (New Society)