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China, Hong Kong sign 200-bln-yuan swap deal: authorities
Beijing (AFP) Jan 20, 2009 China and Hong Kong signed a 200-billion-yuan (29-billion-dollar) swap agreement on Tuesday as part of Beijing's measures to help the city through the economic crisis, authorities said. "It will... strengthen the outside world's confidence in the financial stability of Hong Kong," the People's Bank of China said in a statement about the three-year agreement. The arrangement will ease liquidity trouble for the territory as it will boost the amount of yuan that Hong Kong banks can draw on as they service companies in the city that use the Chinese currency when trading. Hong Kong Financial Secretary John Tsang welcomed the move and said it showed China's support for the trade-dependent financial hub, which slipped into recession in the third quarter as the global slowdown took its toll. "(It) is a policy measure of the central government to further support Hong Kong's economic development," Tsang said. "It will help to maintain Hong Kong's status as an international financial centre." Hong Kong Monetary Authority chief executive Joseph Yam said the agreement would help in "further strengthening of financial cooperation between the mainland and Hong Kong." "The establishment of a currency swap arrangement will help to address contingent needs and maintain financial stability," Yam said. Plans for the swap agreement were announced after Hong Kong Chief Executive Donald Tsang visited Beijing last month for talks focused on cooperation to ward off the effects of the global crisis. It was part of a 14-point plan to further integrate Hong Kong with the mainland in a broad range of areas including finance, infrastructure, investment and services. Hong Kong is a former British colony that returned to Chinese rule in 1997, and the leadership in Beijing has sought to ensure the southern territory maintains its international competitiveness. Last month, Donald Tsang also said China had agreed to let eligible Hong Kong companies use the Chinese unit as a settlement currency for trade transactions. Hong Kong has announced a series of measures to try to stimulate the economy in recent months, including a 100 billion Hong Kong dollar (12.8 billion US) loan guarantee fund for businesses struggling to borrow from banks. The city's gross domestic product fell 0.5 percent in the third quarter from the previous three months on a seasonally adjusted basis. This followed a fall of 1.4 percent in the second quarter. Donald Tsang warned Monday that the territory's economy would suffer further negative growth in the first half of 2009. Share This Article With Planet Earth
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