$1.6 bln currency swap deal to facilitate Turkish-Chinese trade

Experts who took part in Wednesday’s meeting, where they discussed a $1.59 billion Turkish-Chinese currency swap agreement are seen in this handout photo.

April 26, 2012, Thursday/ 15:49:00

A group of financial experts from Turkey and China's major banks came together Wednesday in İstanbul to discuss the opportunities offered by the currency swap agreement recently signed between the two countries.

The Central Bank of Turkey and the People's Bank of China signed a $1.59 billion currency swap agreement on Feb. 21 during Chinese Vice President Xi Jinping's visit to Turkey. The three-year agreement enables the use of local currency -- the renminbi (RMB) and the Turkish lira -- in bilateral trade and is extendable by mutual consent. It aims to enhance financial cooperation, promote bilateral trade and ensure regional financial stability. Turkey and China reaffirmed the aim of boosting bilateral trade from the current $24 billion to $100 billion by 2020 during Prime Minister Recep Tayyip Erdoğan's visit to China two weeks ago.

Speaking at the conference, Cai Wanhang, deputy chief representative from the Bank of China's İstanbul office, said the recent currency swap agreement would allow Turkish and Chinese companies to import and export using the RMB and the Turkish lira. Trading with local currencies will enable Turkish and Chinese banks and companies to avoid the risk exposure of the US dollar. The other benefits of using the RMB for Turkish banks and companies, according to Cai, included attracting more customers and facilitating business expansion in the Chinese market. In his presentation Cai cited HSBC research that indicated that the RMB is the third most traded currency after the US dollar and the euro. By 2025, the RMB will be one of the three major currencies used around the world, besides the US dollar and the euro, said Cai, citing World Bank research. According to Cai, it was the perfect time for the RMB in Turkey since Turkey-China strategic cooperation was booming and the bilateral trade volume was growing fast.

The Bank of China is the first Chinese bank appointed by the People's Bank of China to experiment with cross-border trade in the RMB.

Speaking to Today's Zaman, Cai said Turkish banks could sign agreements with the Bank of China to open RMB accounts. Also, services such as overdraft and loan facilities could be discussed. The central banks from the two countries will further negotiate the exchange rate soon.

Ayşe Tuna, group manager of financial institutions from Türkiye İş Bankası, said at the conference that trade between Turkey and China has increased tremendously in the past decade. There are Turkish companies such as Çimtaş, Demirdöküm and Arçelik that already are investing in the Chinese market. Also, Chinese companies like Huawei, ZTE and Haier and Geely are doing business in Turkey. From her experience, there is great demand from Turkish customers to use the RMB as a trade and investment currency.

Toygun Özmen, head of the Trade and Supply Chain for British HSBC's Turkey branch, also spoke at the conference and said that according to HSBC's experience, the RMB is a valuable reserve currency. Using the RMB in trading with China could reduce transaction costs for Turkish companies.

Batuhan Tufan, head of financial institutions for Turkey's Garanti Bank, said Garanti Bank had special RMB credit card services for customers to use in China.

At the conference Andrew Leung, China specialist for International Consultants Ltd., delivered a speech, “Renminbi Internationalization: Opportunities and Policy Implications for Central Banks.” Many businessmen, consultants and bankers attended this conference.

Semih Tufan, director of the international banking and structured finance department for Halk Bank, said that although Halk Bank was not involved in currency swaps at the moment, it fully intends to develop RMB services in the future.

Representatives from Akbank and Crédit Agricole Corporate and Investment Bank also expressed their interest in developing RMB financial services for customers.

Celine Demolliens, business development manager from consultancy company SinerjiAktif, said that many of her customers are starting to show an interest in diversifying currency in trade and investment.

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