UAE Central Bank renews $4.9bn currency swap deal with China

Banking regulators sign initial agreement to enhance collaboration on central bank digital currency development

Khaled Balama, UAE Central Bank Governor, and Pan Gongsheng, Governor of the People’s Bank of China, renew a bilateral currency swap agreement for five years in Hong Kong. Photo: Central Bank of the UAE
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The UAE Central Bank and the People’s Bank of China signed an agreement in Hong Kong to renew their bilateral currency swap pact for five years, to boost financial and economic ties.

The size of the agreement is Dh18 billion ($4.9 billion), the UAE regulator said in a statement on Tuesday.

A foreign currency swap is an agreement to exchange currency between two parties, in which they swap principal and interest payments on a loan made in one currency for a loan of equal value in another currency.

The two banking regulators also signed an initial pact to enhance technical and technological co-operation in the development of central bank digital currencies, the UAE Central Bank said.

The renewal of the currency swap agreement “reflects the depth of the relationship between the UAE and China, embodying the Central Bank’s commitment to solidifying the partnership with our Chinese counterpart in financial, trade and investment fields”, said Khaled Balama, UAE Central Bank Governor.

“We look forward to strengthening co-operation with our partners on innovation and solutions in financial technology, including central bank digital currency to support the growth of our economy and society."

China is the UAE’s top global trade partner with the value of non-oil trade between the two countries having exceeded Dh264.2 billion in 2022, according to official data. The two countries expect bilateral trade to hit $200 billion by 2030.

China is also the third-largest foreign investor in the UAE.

The UAE Central Bank has signed similar currency swap agreements with its counterparts in Egypt and Turkey to help improve trade and investment ties.

The renewed agreement with China will also promote bilateral trade and strengthen financial co-operation between the countries, the regulator said.

It will facilitate the provision of liquidity in local currency to financial markets for the settlement of cross-border financial and trade transactions in a “more effective and efficient manner”, it added.

Meanwhile, the preliminary pact aims to strengthen co-operation between the UAE Central Bank and the Digital Currency Institute of the People’s Bank of China in financial technology.

It will enable the exchange of information on best practices and regulations relating to digital currencies and support the implementation of joint initiatives, including the mBridge project, a multicentral bank digital currencies platform to facilitate cross-border trade payments, the statement said.

Updated: November 28, 2023, 4:34 PM