PAK-CHINA CURRENCY SWAP AGREEMENT
Jan 2 - 8, 2012
Pakistan and China, on Friday last, signed six accords including currency swap agreement to further bolster their existing trade and economic cooperation. The agreements worth over $700 million were signed between the two sides at a ceremony held at the PM House Islamabad.
The agreements included a currency swap agreement, the setting up of a power plant and repairing of Karakoram Highway (KKH) and were witnessed by Prime Minister Yousuf Raza Gilani and State Councilor of China, Dai Bingguo.
The other agreements signed were the supplementary agreement on extension of five-year development program on trade and economic cooperation between the two countries, the loan agreement on provision of $259 million for preferential credit, and the loan agreement on export credit facility.
People's Bank of China (PBC) and the State Bank of Pakistan (SBP) signed a landmark bilateral currency swap arrangement for a three years period to boost bilateral trade.
Such agreements were not common and signed only amongst the countries which have full trust in each other.
Du Jinfu, Deputy Governor of PBC and Yasin Anwar, Governor SBP, signed this agreement on behalf of their respective governments.
The Governor SBP said that bilateral trade and investment would receive a boost as a result of this agreement, further augmenting the economic ties between China and Pakistan. "This agreement will make a significant impact in strengthening the close and special relationship between the two countries," he added.
According to economic analysts, the announcement of the currency swap agreement between the two central banks will send positive signal to the market on the availability of the liquidity of the other country's on the onshore market and as a result it will promote bilateral trade denominated in Chinese Yuan and Pakistani Rupee.
Initially, the currency swap agreement is for three years but could be extended with mutual consent. The analysts are also of the view that this agreement will help Pakistan to improve its exports to China, which is a big market.
Speaking on the occasion Prime Minister Gilani said that there is a consensus of two countries on the global and regional issues and a commonality of approach to advance the international agenda for peace.
He termed the friendship with China as the cornerstone of Pakistan's foreign policy and said, "The relations between Pakistan and China go beyond governments and are deeply rooted in the hearts and minds of our people. We rejoice with our Chinese friends on their remarkable national accomplishments and deeply appreciate China's invaluable support for Pakistan socioeconomic development."
The currency swap agreement is of 10 billion Chinese Yuan, which is equal to US$1.57 billion. The timely help from China will help Pakistan in meeting the difficult challenge it is faced with.
The history of bilateral relations proves beyond doubt that China is a friend that believes in helping us to grow economically and militarily as a self-reliant country. One should also consider its help in the energy sector and nuclear field that includes Chashma nuclear power plant.
Besides, it is also helping us in promoting our trade, economy, technology, and defense. Because of it, we are now indigenously manufacturing JF-17 Thunder aircraft that is considered a formidable fighter jet. Likewise, Gwadar seaport is a source of pride for us. The list of projects is virtually endless and it all shows that China is a country that genuinely wants Pakistan to develop into a prosperous and stable country. At the same time, it strongly believes in non-intervention in our domestic affairs. Such friends are indeed rare in basically selfish world.
Last year when Pak-US relations were passing through a tense phase and we were being threatened by their generals, the Chinese Vice Prime Minister, Meng Jianzhu, visited Pakistan and made a bold statement that it stood with Pakistan to uphold its sovereignty, independence and territorial integrity.
This timely support from an emerging super power, besides being a morale booster for Pakistani nation, also had the desired effect on Washington.
Speaking at a function held to celebrate the 60th anniversary of the establishment of Pak-China diplomatic relations, the Chinese minister declared "Pakistan was the only country in the world that enjoyed the status of all-weather friendship with China and it categorically supports Pakistan to uphold its sovereignty and independence".