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Sancho Panza

China Signs Second-Biggest Swap Line With Ecb

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New York Times 10/10/13

' BEIJING/FRANKFURT — China accelerated plans to internationalize its currency on Thursday by agreeing to swap euros and yuan with the European Central Bank in a deal that is set to be China's second-largest to date.

The bilateral currency swap agreement between the European Central Bank (ECB) and the People's Bank of China (PBOC) is valid for three years and has a maximum size of 350 billion yuan, or 45 billion euros ($60.8 billion).

The deal is the latest of a string of currency swaps that China has created with other nations to promote usage of the yuan in global commercial and financial transactions, with the ultimate goal of rivaling the dollar as a reserve currency.

"The emphasis is on renminbi internationalization," said Louis Kuijs, an RBS economist in Hong Kong.

He said currency swaps also provide central banks with additional liquidity in times of financial emergencies, though this function is of secondary purpose in China's swap agreements.

The swap deal with the ECB is China's second-biggest with a foreign central bank, after South Korea's 360 billion yuan swap line. China also has a 400 billion yuan swap agreement with Hong Kong.

As China's second-largest trade partner, Europe is a natural destination for Beijing in raising the yuan's profile. The interest is reciprocated by some European nations such as Britain and Germany which want to be the clearing center for the yuan in Europe and provide what may be a lucrative financial service.

The yuan is now the world's eighth most-traded currency, financial services provider SWIFT said this week, with a market share of 1.5 percent and overtaking the Swedish krona, the South Korean won and the Russian rouble.

China's swap deal with the ECB comes after French President Francois Hollande said in June that France is working on setting up a currency swap line with the world's No. 2 economy.

With its status a center for global foreign exchange trading, London appears to be the forerunner in clinching an agreement with Beijing to become Europe's offshore yuan trading center, Chinese academics have said.

Indeed, SWIFT said its data showed 60 percent of yuan trades are done out of Britain.

($1 = 0.7398 euros) '

Edited by Sancho Panza

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The last thing Mervo the Clown did before slinking off in utter disgrace was to sign the UK up to bail out the ChiComs. The speed at which these swap deals have been arranged gives you some idea how much trouble the Chinese shadow banking system is really in.

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The last thing Mervo the Clown did before slinking off in utter disgrace was to sign the UK up to bail out the ChiComs. The speed at which these swap deals have been arranged gives you some idea how much trouble the Chinese shadow banking system is really in.

this is the new 'it' thing... Every nation wants to be able to get to position where if they begin to print .. It impoverishes others and not them... Good luck to them

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The last thing Mervo the Clown did before slinking off in utter disgrace was to sign the UK up to bail out the ChiComs. The speed at which these swap deals have been arranged gives you some idea how much trouble the Chinese shadow banking system is really in.

Quite although,the last time around it was mainly dollar swap lines though.

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The last thing Mervo the Clown did before slinking off in utter disgrace was to sign the UK up to bail out the ChiComs. The speed at which these swap deals have been arranged gives you some idea how much trouble the Chinese shadow banking system is really in.

They are ensuring the entire system is too big to fail and too big to bail. We are in uncharted territory when the magic dust works off who knows how this will play out, although I think a minimal soft reset seems more and more unlikely.

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