Korea-China Currency Swap-Financed Trade Settlement Facility

Jerome Shin ()
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Jerome Shin: The Bank of Korea

A chapter in Currency Cooperation in East Asia, 2014, pp 123-132 from Springer

Abstract: Abstract The US-Dollar is still the most widely used currency for the settlement of trade transactions in East Asia. Currency swaps between Asian countries are one possibility to reduce this dependency on the US Dollar. This chapter explains the background and various aspects of the Korea-China currency swap-financed facility. First the framework and mechanisms of the facility with the roles of the involved central banks, commercial banks, importers and exporters are presented. Then the performance and desired effects of the swap agreement are explained. This includes the reduction of exchange rate risks, transaction costs and ultimately the increase of trade between Korea and China. Finally methods to enhance and to build on the facility, like increasing the number of involved businesses, simplifying the process and relaxing Korean foreign exchange transaction regulations are explored.

Keywords: Central Bank; Local Currency; Common Currency; Domestic Bank; Exchange Rate Risk (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:fimchp:978-3-319-03062-3_8

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DOI: 10.1007/978-3-319-03062-3_8

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