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China to bolster image as responsible big nation
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09:57, March 31, 2009

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China has always worked together with the international community to safeguard global economic and financial stability ever since the outbreak of global financial crisis. As a very responsible big nation, it has taken an active part in international cooperation to the best of its ability to cope with the current financial crisis.

People's Bank of China (PBOC) has signed bilateral currency swap agreements worth 580 billion RMB yuan with monetary authorities of the Republic of Korea (ROC), Malaysia, Belarus, Indonesia and other adjacent economies as of December 2008. When conditions are mature, PBOC will further study to come to similar currency swap arrangements with monetary authorities of other countries in the region, noted its leading officials.

A currency swap is an agreement between two parties to exchange a currency after a specified period of time. So, the currency swap agreement is intended to provide short-term liquidity support to the banking systems in both economies and bilateral trade. In other words, when fluidity is plunged into difficulty, the two parties, which have reached the agreement, would support each other, so as to increase their capacity in responding to crisis situations.

By reaching bilateral swap deals with neighboring economies, China can contribute not only in stabilizing its surrounding environment but also in bolstering or plucking up the confidence of coping with crisis together.

China's central bank, PBOC, inked currency agreement with the Bank of Indonesia (BI), the central bank of the county on March 23. Indonesia's BI Governor Prof. Budiono, an ace economist, said that China's swap agreement with his bank “could help decrease dollar demand for imported goods and investment and stabilize the rupiah (the Indonesian currency), paying for imports and foreign trade”; it can also help alleviate the impact of global financial crisis that has exerted on Indonesia.

China has taken an active part under the framework of ASEAN+ plus 3 countries of Japan, China and ROK, striven to press ahead with the multi-lateralization of Chiang Mai Initiative (CMI) and provided financial support in an effort to maintain regional economic and financial stability.

CMI was launched at the second meeting of the ASEAN+3 finance ministers in Thailand in May 2000, and a decision was made to add China, Japan and ROK to the currency swap network. In order to extend currency swap deals with other countries in the region, the financial chiefs on February 23 this year agreed to increase the size of their joint currency pool to 120 billion US dollars from an earlier-proposed 80 billion dollars.

Meanwhile, China has been working actively to spur the process for setting up the proposed Reserve Bank of Asia. The economies in the region have so for signed 17 bilateral swaps, worth 118 billion dollars. On the part of China, it has implemented bilateral currency swaps to inject liquidity in to neighboring economies. As part of the joint endeavor, PBOC has inked six bilateral swaps with the central banks of Japan, ROK, Indonesia, Malaysia, Thailand and the Philippines, and China has promised to provide 16.5 billion dollars of funds to date.

So far, the regional Reserve Bank under the multi-lateralization item of the Chiang Mai Initiative has entered into a substantial phase. The ASEAN+3 countries are now having full consultations on a range of main factors for the establishment of the regional reserved bank, including the ratio of each country to fund providing and conditions with which to ask for credit.

The economic and financial ties and exchangezss among ASEAN+3 of China, Japan and ROK have turned increasing closer. Against a backdrop of infiltrating, deteriorating global financial crisis worldwide, the multi-lateralization of CMI is expected to play a vital, important role in maintaining regional financial stability and spurring regional trade and investment.

By People's Daily Online and contributed by PD reporter Wu Chengliang

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