China, Thailand Sign Currency Swap Agreement

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Last updated at: (Beijing Time) Friday, December 07, 2001

China, Thailand Sign Currency Swap Agreement

The People's Bank of China (PBOC) and the Central Bank of Thailand signed an agreement Thursday in Beijing on a mutual currency swap.

The PBOC will provide as much as 2 billion US dollars credit for the Thai central bank when necessary to supplement rescue funds by international financial institutions, in order to help Thailand solve international payment problems and protect its financial stability.

The People's Bank of China (PBOC) and the Central Bank of Thailand signed an agreement Thursday in Beijing on a mutual currency swap.

2 billion US dollars credit

According to the agreement, the PBOC will provide as much as 2 billion US dollars credit for the Thai central bank when necessary to supplement rescue funds by international financial institutions, in order to help Thailand solve international payment problems and protect its financial stability.

A PBOC spokesman said that since the Asian financial crisis, Asian countries all want to reinforce regional financial cooperation, to jointly fight against any financial crisis and to protect regional financial stability.

"10+3" financial cooperative

In 1998, at the suggestion of China, 10 Asean countries plus China, Japan and the Republic of Korea (10+3) established a financial cooperative, aiming to reinforce policy talks and to set up a capital rescue mechanism.

Chiang Mai Proposal

In May 2000, the Chiang Mai Proposal was passed in the Conference of 10+3 Financial Ministers, bringing the establishmentof a mutual currency swap network between 10+3 members to help itsmembers solve short-term international payment problems.

First one of its kind

The Sino-Thai currency swap agreement is the first of its kind agreed to by China under the Chiang Mai Proposal, and is also the result of joint efforts by China and Thailand to protect regional financial stability.

The spokesman said that China has also negotiated with Japan, the Republic of Korea and other countries on mutual currency swap issues, and will soon sign agreements accordingly.

Financial Cooperation

Chinese Vice Premier Wen Jiabao met Thursday with Pridiyathorn Devakula, governor of the Central Bank of Thailand who arrived in Beijing to sign the mutual currency swap agreement with the People's Bank of China (PBOC).

Wen offered his congratulations for the signing of the agreement. He also exchanged views with Devakula on financial cooperation between China and Thailand as well as on the current regional and international economic situation.

Dai Xianglong, governor of the PBOC, and Don Pramudwinai, Thai ambassador to China, also attended the meeting.

The Chiang Mai Initiative

I. Background

1. At the Fourth ASEAN Finance Ministers Meeting (AFMM) in Brunei Darussalam on 24-25 March 2000, the Ministers agreed to explore way to expand the ASEAN Swap Arrangement to include China, Japan and Korea with the following guidelines :

a) The size of the facility should be large enough for the requirement of the East Asian region ;

b) The arrangement should assist Member Countries who experience balance of payments difficulty ; and

c) Structures and modalities of the arrangement will be worked out later.

ASEAN

(Association of Southeast Asian Nations)

ASEAN originated in the Association of Southeast Asia founded on July 31, 1961 in Bangkok. On August 8th, 1967, Founding Fathers from Indonesia, Malaysia, the Philippines, Singapore and Thailand established the ASEAN and signed the ASEAN Declaration in Bangkok. Later, Malaysia, Thailand and the Philippines decided to replace the Association of Southeast Asia by ASEAN.

By the end of 1999, there have been 10 nations in the Association namely Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Laos, Myanmar and Cambodia. ASEAN 10+3 meeting includes another three countries, China, Japan and the Republic of Korea (ROK).

Against all odds, ASEAN was founded to provide a framework and mechanism for regional cooperation.

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