China Signs Currency Swap Deal With Pakistan To Boost Bilateral Trade And InvestmentChina Signs Currency Swap Deal With Pakistan To Boost Bilateral Trade And Investment

China Signs Currency Swap Deal With Pakistan To Boost Bilateral Trade And Investment

China Signs Currency Swap Deal With Pakistan To Boost Bilateral Trade And Investment: The currency swap arrangement between State Bank of Pakistan (SBP) and People’s Bank of China (PBOC) has been extended for a period of 3 years in respective local currencies.

The central bank of China People’s Bank of China (PBOC) has signed a 20 billion yuan or $3.13 billion currency swap deal with Pakistan. It is a three-year bilateral agreement with Pakistan.


This agreement was announced by the China People’s Bank of China (PBOC) on its website claiming that it will boost bilateral trade and investment in the countries.

As per Chinese media sources, China and Pakistan believe that the extension will benefit both the countries. It will boost economic growth through investment and bilateral trade. Though this agreement is valid for three years if both the countries are willing it can be extended further.

China Signs Currency Swap Deal With Pakistan To Boost Bilateral Trade And Investment
China Signs Currency Swap Deal With Pakistan To Boost Bilateral Trade And Investment

What A Currency Swap Deal Do?

  • A currency swap deal enables two organizations or countries to exchange payments in one currency for same amounts in the other currency to help bilateral trade settlements and ensure liquidity support to the financial industries.
  • A currency swap is a legal agreement, between two parties like in this case between China and Pakistan to exchange the principal and interest rate obligations in different currencies.

Earlier in May, Bank of China officially launched the Yuan Currency along with its clearing and settlement services in Karachi, Pakistan. A tweet stated, “Bank of China has rolled out yuan clearing & settlement services in Pakistan, to push redback’s expansion in S Asia. It will help mitigate exch. rate risks, lowering transaction costs n facilitating trade n investment btw Pak China, State Bank of Pakistan greenlit the plan in April.”

Both the central banks have agreed to increase the CSA amount from CNY 10 billion to CNY 20 billion and from PKR 165 billion to PKR 351 billion.

The increase in the CSA amount reinforces the commitment of the two central banks to promote the usage of local currencies in bilateral trade and investment and strengthening financial cooperation between the two countries.

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