A reciprocal three-year renminbi-sterling currency swap arrangement is likely to be established.
Bank of England governor Mervyn King met Zhou Xiaochuan, governor of the People’s Bank of China (PBoC), in Beijing last week. They agreed to facilitate discussions on the arrangement, which would be used to finance trade and direct investment between the two countries and to support domestic financial stability if necessary.
The Bank of England and the PBoC will work together to sign the final agreement shortly.
King said: "The establishment of a sterling-renminbi swap line will support UK domestic financial stability. In the unlikely event that a generalised shortage of offshore renminbi liquidity emerges, the bank will have the capability to provide renminbi liquidity to eligible institutions in the UK."
Sally Percy is editor of The Treasurer