China's central bank on Monday cut benchmark lending rates by the steepest margin since August 2019 when the market-oriented loan prime rate regime was adopted. The nation is striving to repair the damage of the coronavirus outbreak,which caused GDP to contract in the first quarter. Photo:cnsphoto

The central bank of Argentina announced it will renew a currency cooperation agreement with the People's Bank of China to swap $18.2 billion worth of each other's currencies next week, El Economista reported Friday.

The amount represents 42 percent of Argentina's stock of foreign reserves, which until Wednesday comprised of $43.379 billion, showed BCRA's official website.

Analysts said the renewal of the currency swap hints at growing agricultural trade between the two countries.

"The amount of the newly signed currency swap agreement between China and Argentina has been increased, compared with previous agreements, indicating that China-Argentina trade is expected to increase. Argentina is a major exporter of agricultural products, such as soybeans; and in the currently tense relationship between China and the US, a swap agreement could be a sign of expanding China's sources of buying agricultural products," Chen Bo, an associate research fellow at the Institute for Finance and Economics at the Central University of Finance and Economics, told the Global Times Sunday.

The swap was due to expire Monday in line with the agreement, signed in 2017, between Banco Central de la Republica Argentina (BCRA), Argentina's central bank, and the People's Bank of China (PBC).

"It's an example of win-win cooperation. For Argentina, the agreement helps to improve its sovereign debt crisis and the credit level of the local currency. For China, trade can be settled in yuan, which is good for the currency's internationalization," Chen added.

The first currency swap between China and Argentina was signed in 2009, worth 70 billion yuan ($9.98 billion), and valid for three years, per PBC notice.

PBC and BCRA renewed the bilateral currency swap agreement on July 18, 2017, with the aim of promoting economic and trade development between the two countries, per PBC. The agreement was worth 70 billion yuan, or 175 billion pesos, valid for three years, and to be renewed by mutual agreement.

The two central banks signed a supplementary currency swap deal for 60 billion yuan on December 2, 2018, in addition to the agreement signed in July of 2017. 

This supplementary deal contributes to fostering greater financial stability and strengthening the relationship between both central banks. It further seeks to ease commercial exchange between both countries, BCRA said in 2018.

Global Times