Korea, China agree to renew currency swap
Korea and China have agreed to extend their currency swap deal — the first agreement between the two governments since a slowdown in their economic relationship following the installation of a U.S. anti-missile shield here.
The accord, which came three days after the deal expired, calls for the two countries to extend their currency swap worth 64 trillion won ($55 billion) for three years.
Minister of Strategy and Finance Kim Dong-yeon and Bank of Korea Governor Lee Ju-yeol announced the renewal of the agreement in Washington where they are attending the meeting of G-20 finance ministers and central bank governors.
“It took effect Oct. 11. Technically, it is a renewed deal, but it is the same as an extension,” Kim said.
Despite the expiration, neither the central bank nor the finance ministry disclosed the status of the negotiations, drawing concern that the deal could end due to the diplomatic friction between Seoul and Beijing.
“The two countries drew up the agreement Oct. 10, but delayed the announcement due to technical reasons,” Lee said.
A currency swap is a financial buffer since a country can borrow foreign funds against its own currency. After suffering a massive outflow of capital during the 1997 Asian financial crisis, Korea has been actively signing currency swap deals.
The won-yuan deal was signed in December 2008 and went through a series of extensions and expansions. It is the largest deal that Korea has inked with a foreign country. By comparison, it has signed deals with Indonesia for $10 billion and Australia for $7.7 billion.
The prolonged negotiations had been attributed to the two countries’ raised tension over the deployment of the Terminal High Altitude Area Defense (THAAD) system because they had been favorable on extending the deal.
In 2015, a similar agreement between Korea and Japan was terminated with two of the known factors being historical and territorial issues including former President Lee Myung-bak’s visit to the Dokdo islets in 2012.