Renminbi swap deal brings Swiss hub dream closer

China's central bank and Switzerland's National Bank have agreed on the terms of a currency swap deal Keystone

The Swiss National Bank (SNB) and China have signed a currency swap agreement in a bid to allow Beijing to expand its renminbi business in Switzerland. The finance ministry has hailed the accord as an important step.

The three-year deal, signed in Beijing on Monday, sets the conditions for the central banks of the two countries to purchase and re-purchase Chinese renminbi or Swiss francs up to CHF21 billion ($23.4 billion).

“The swap agreement is a key requisite for the development of a renminbi market in Switzerland,” the SNB said.

The SNB can also buy up to CHF2 billion worth of Chinese bonds, helping it diversify its foreign-exchange reserves which have swelled to almost CHF450 billion.

The finance ministry also welcomed the move, saying both sides following bilateral talks in Switzerland over the past two days agreed to continue cooperation to develop an offshore hub for trading the Chinese yuan.

Financial dialogue

The finance minister, Eveline Widmer-Schlumpf, and National Bank chairman Thomas Jordan met China’s central bank governor, Zhou Xiaochuan, in Zurich last month on to discuss greater financial-sector cooperation.

The next meeting to foster dialogue is scheduled in China next year.

The financial talks, a free trade agreement in force since the beginning of July, and a revised double taxation agreement will strengthen bilateral economic and financial relations, a statement said.

Switzerland and China have been holding regular talks to boost financial cooperation since last December.

As part of its effort to revamp the country’s financial system, the Chinese government has been pushing for a greater role for the yuan on the world stage over the past five years.

Renminbi hub

China has agreed currency swap deals with more than 20 countries.

Such deals are seen as key for the establishment of hubs for trading the Chinese currency.

Another precondition is the establishment of a Chinese business bank in a country.