China, Thailand sign currency swap agreement (Dec 2011)

Renmimbi-Yuan

Source: People’s Daily – China, Thailand sign currency swap agreement

Notable Excerpts:

Thai media reported that China and Thailand signed a currency swap agreement worth 7 billion yuan on Thursday. Prasarn Trairatvorakul, president of Thai central bank said on Dec. 19 that this agreement would promote the use of yuan in international trade settlements.

Insiders said that the swap agreement will enable both countries use domestic currency for valuation and settlement in future business and investment without relying on the currency of any third country.

Now, the exports value from Thailand to China accounts for 11 percent of the total volume of exports, and more than 90 percent of the total exports from Thailand are made in U.S. dollars.

Li Wencong, deputy president of the Industrial and Commercial Bank of China (Thailand) said the investment and trade volume between China and Thailand is considerable, which was previously settled with currency of the third party including U.S. dollars.

In this way, both countries need to exchange their domestic currency into U.S. dollars when engaging in bilateral investment and trade with the commission charge normally paid twice.

From time to time, financial experts generally hold that the direct changes between yuan and THB will be beneficial to the promotion for yuan internalization, which is also a move to bring mutual benefit to China and Thailand. In particular, in the context of Europe’s uncertain economic prospect, signing the currency swap agreement with China will stabilize the THB and will further improve the stability of the macro-economy.

For example, in 2009, the People’s Bank of China and Indonesia’s central bank signed a three-year currency swap agreement, providing that the maximum limit of currency swap of two countries was 100 billion yuan or 175 trillion IDR.

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