China, Philippines Sign Currency Swap Deal

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Last updated at: (Beijing Time) Sunday, August 31, 2003

China, Philippines Sign Currency Swap Deal

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China and the Philippines have signed a currency swap agreement and a memorandum regarding china's provision of a preferential loan for a Philippine railway project, in a latest move to boost bilateral cooperation and safeguard regional financial stability.

Philippine President Gloria Macapagal-Arroyo and visiting Chinese top legislator Wu Bangguo witnessed the ceremonial exchange of the signed swap deal and the signing of the memorandum of understanding at the Presidential Palace here Saturday.

Under the bilateral currency swap deal between the central banks of the two countries, China will provide as much as 1 billion US dollars credit to the Philippines when necessary to supplement rescue funds by international financial institutions, in order to help the Philippines solve balance of payments problems and protect its financial stability.

The agreement is the fifth of its kind signed by China, which has already signed bilateral currency swap deals with Thailand, Japan, South Korea and Malaysia totaling 8.5 billion dollars.

Such agreements are part of the Chiang Mai Initiative which aims to build closer monetary ties by creating a network of central bank currency swaps among the 10 members of the Association of Southeast Asian Nations plus China, Japan and South Korea (ASEAN plus three).

The pacts make foreign exchange reserves available at short notice to a country facing short-term international payment problems and whose currency is under speculative attack, in a bid to avert a financial meltdown similar to the 1997-1998 Asian financial crisis triggered by the sharp devaluation of the Thai baht.

The Chiang Mai Initiative was adopted by ASEAN plus three finance ministers at their second annual meeting in Thailand in May 2000. With the signing of the deal between China and the Philippines, the number of bilateral currency agreements in the region has increased to 13, and the size of the network has reached 32.5 billion dollars.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Under the memorandum of understanding signed by the Export-Import Bank of China and the Philippine Department of Finance, China will provide a preferential buyer's credit of 400 million dollars for the financing of the construction of a railway in the main northern island of Luzon in the Philippines.

Wu Bangguo, Chairman of the Standing Committee of the National People's Congress of China, arrived here Saturday afternoon for an official visit and for the Fourth General Assembly of the Association of Asian Parliaments for Peace.

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