2.4 RMB swap by monetary authorities

A currency swap contract allows both parties to acquire each other's currency on the loan of equivalent domestic currency,so as to provide short—run liquidity to domestic financial institutions if necessary.Through this currency swap,foreign currency is added into domestic financial system,available to firms for imports and payments(Table 2—8).

Source:The People's Bank of China.

China has signed currency swap contracts with 14 monetary authorities since 2008,expanding RMB's use in these central banks.In 2011,the amount of currency swap between PBOC and other monetary authorities achieved 1.3 trillion yuan.The swapped RMB functioned differently according to the needs of each country.For instance,RMB was used for settlement in trade in Argentina,Malaysia and Indonesia,as foreign exchange reserve in Belarus,in South Korea for financial transactions and funding Korean enterprise in China,and in Hong Kong as a source of money to develop offshore RMB business.Enlarging the amount of RMB swap not only helps ease China's major trade partners’ lack of foreign exchanges in import or debt payments and promote bilateral trade development,also expands the use of RMB in trade settlement and circulation and raise RMB's international influence.