The Role of Currency Swaps on the Internationalization of RMB

Abstract

The people's Bank of China has signed a series of currency swap agreements with many countries and regions. This paper review practice of people's bank of China currency swap, and then analysis role of currency swaps on internationalization of RMB, and give some suggestions on future of RMB currency swap. Index Terms - currency swap; Internationalization of RMB; capital account 1. Introduction Currency swap refers to two main holders of different currencies, in accordance with contract, exchange two equivalent currencies at beginning of period, in final exchange principal and pay mutual interest due. A typical currency swap involves three basic steps: first, exchange principal at beginning of period. At beginning of swap agreement, Two main exchange two currencies agreed. The aim is to determine principal , so as to future of calculating interest. Second, Interest rate swap. In duration of swap agreement, two sides pay interest in accordance with agreement. Finally, final principal swap again. After 2008 international financial currency exchange has been widely used in many countries, To enhance market confidence, provide liquidity support and as tools to resolve financial crisis. The people's Bank of China also actively participated in regional currency swap mechanism, signed a series of bilateral currency swap agreements. The people's Bank of China aim was to cope with financial crisis. But with American quantitative easing monetary policy and the European debt crisis, people's Bank of China accelerated pace of currency swap .Its purpose is to promote RMB internationalization process.