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South Korea-China currency swap deal still underway

Posted October. 11, 2017 07:36,   

Updated October. 11, 2017 09:00

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South Korea and China dragged on their discussion to extend their outgoing currency swap deal worth 56 billion dollars until it expires on Tuesday. The two countries seemed to be positive about the extension of the currency swap but at the same time very cautious stating that they need more time before coming up with a conclusion.

"Nothing has been decided," Bank of Korea Governor Lee Ju-yeol talked about the bilateral currency swap. "It would be best if everything could be settled before the current deal expires but this may not be the case,” Lee added. “We don't need to obsess over the expiration date.”

Responding to some local media reports on Tuesday, which claimed that the extension of the South Korea-China currency swap deal has practically been agreed upon, the Bank of Korea and the Ministry of Strategy and Finance were cautious, saying, "It is a matter that we are still under discussion."

"I have asked various times to wait until the deal is concluded and I am sincerely concerned about how (some media reports) will affect the deal," said Gov. Lee. It is widely expected that the contract shall expire with a grace period for the moment and resume the negotiation within this month.

Currency swap is a contract between the central bank of each country to lend currency to each other in case of an economic emergency. Even if the extension of the South Korea-China currency swap deal fails, the influence it may have on South Korea's financial market is trivial in light of its foreign exchange reserves of 380 billion dollars.

But given the tension between Seoul and Beijing over the deployment of THAAD missile system, failure to extend the currency swap may bring a negative message to South Korea's relationship with China. The Global Times, a tabloid controlled by China's Communist Party, reported Tuesday, "Korea is on edge (about the currency swap)."



Gun-Huk Lee gun@donga.com