The 350 billion yuan currency swap deal between the People’s Bank of China (PBoC) and the European Central Bank carries both practical and symbolic importance. The size of the swap, the third-biggest after those with Hong Kong and Malaysia, is expected to foster rising bilateral trade and investment between the world’s second-largest economy and the eurozone. China is the European Union’s second-largest export market after the United States. The 28-nation bloc exported 71.4 billion euros of goods to China in the first six months of this year, with imports reaching 133.6 billion euros. Symbolically, the agreement reflects Chinese policy makers’ pledge to expand cross-border use of the renminbi, further facilitating the internationalization of the Chinese currency. The renminbi, by assuming a bigger role in global financial markets, will grow in importance and attractiveness as a reserve currency for global central banks. Taiwan’s central bank was the latest to include the currency in its foreign reserves. According to an industry group, the renminbi was the world’s eighth most-traded currency in August, up from 11th in January 2012.
New economic target: China’s policymakers are expected to set a 7 percent growth target for the country’s gross domestic product for 2014 in the upcoming Central Economic Work Conference. That compares with an official 7.5 percent goal set for this year. Top leaders including President Xi Jinping and Premier Li Keqiang have said more than once that slower economic growth is expected after double-digit expansion in the past decade and the result of their plan to restructure the country’s economy. It is clear that Xi’s administration is trying to buy more time by slowing the development pace to resolve escalating risks seen from growing local government debts, industrial overcapacity and environmental pollution. The conference is expected to be held in December, right after the third plenary session of the Communist Party in November. The People’s Bank of China will also set its fiscal and monetary policy stance for next year.
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