China and Hong Kong have signed a three-year currency-swap deal valued at up to US$29.3 billion, the Wall Street Journal reported. The deal between the Hong Kong Monetary Authority and the People’s Bank of China is expected to provide short-term liquidity to the mainland operations of Hong Kong banks and the Hong Kong operations of mainland banks. It is also expected to help with renminbi-based trade settlement. Beijing has said it would allow some Hong Kong companies to conduct trade settlements in renminbi. Analysts said the currency swap could be a step towards liberalization of the renminbi. The government has also pledged to assist Hong Kong businesses’ mainland operations which are suffering due to a drop in export demand.
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