China and Hong Kong signed a 200-billion-yuan (29-billion-dollar) swap agreement on Tuesday as part of Beijing’s measures to help the city through the economic crisis, the Chinese central bank said.
“It will… strengthen the outside world’s confidence in the financial stability of Hong Kong,” the People’s Bank of China said in a statement about the three-year agreement.
It will ease liquidity trouble for the territory as it will boost the amount of yuan that Hong Kong banks can draw on as they service companies in the city that use the Chinese currency when trading.
Plans for the swap agreement were announced after Hong Kong Chief Executive Donald Tsang visited Beijing last month for talks focused on cooperation to ward off the effects of the global crisis.
It was part of a 14-point plan to further integrate Hong Kong with the mainland in a broad range of areas including finance, infrastructure, investment and services.
Last month, Tsang also said China had agreed to let eligible Hong Kong companies use the Chinese unit as a settlement currency for trade transactions.
