Currency swap lines: a way to bring countries closer
A currency swap line is an agreement between two central banks to automatically exchange currencies in the case of a shortage of liquidity on one currency, so that commercial banks can access the foreign currency through their domestic central bank.
China has established several currency swap lines (amounting to USD 500 billion) as part of its diplomatic efforts. Indeed, the possibility for foreign countries to access Chinese Renminbi, the only partially convertible currency of a long closed-off country, at any time, is a major step toward the integration of China in the global capitalist system. As Allen & Pryke put it, currency swap lines allow ‘certain forms of money to leap across the world connecting spaces and times’, in this case creating a sense of closeness with a country usually seen as Other.
China’s monetary diplomacy aims at strengthening its ties with strategically selected countries, as well as generally reinforcing its emerging status on the global stage. While initially limited to Asian or developing countries, China’s currency swap lines now cover 32 countries, including since 2013 a G7 country: the UK.
https://www.ft.com/content/c063da4c-dbcc-11e2-8853-00144feab7de
Contributed by JaanaSerres on 22/01/2018
