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Extension of currency swap deal between Seoul and Beijing remains uncertain

Collected: 2017.08.24

Distributed: 2017.08.29

Source: Go Direct

China remains unresponsive to South Korea’s repeated requests for talks to lengthen their expiring bilateral currency swap deal, raising concerns the ongoing cross-border tensions between Seoul and Beijing over the deployment of Terminal High Altitude Area Defense (THAAD) could jeopardize the deal that symbolizes their economic cooperation ahead of the 25th anniversary of their diplomatic relations on Aug. 24.

South Korea has introduced currency swap deals with China and other countries to defend against a possible liquidity crunch during times of global financial turmoil.

South Korea and China extended and increased currency swap lines in 2011 and 2014 after the first initiation in late 2008. The two agreed to prolong the latest one in April of last year, but there has been no follow-up discussion since February when Seoul decided to deploy an advanced U.S. missile defense system in South Korea. The recent deal is due to expire in October.

“The matter is continuously discussed at the working level and we will have to wait and see what the result will be,” said Ko Hyoung-kwon, first strategy and finance vice minister, on Monday. The Korean government and the Bank of Korea have been in a position to continue discussion with China by separating economic issues from political issues, but Beijing could cold-shoulder Seoul’s request unless the two have a breakthrough to resolve the tensions over the THAAD issue.

Currently, South Korea has currency swap lines with China, Indonesia and other countries worth a combined $122.2 billion. China accounts for almost half of the total.

By Cho Si-young and Boo Jang-won

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