China is in talks with Japan and South Korea – both US allies – about a possible trilateral currency swap to bolster the region’s financial safety net and deepen economic cooperation amid US President Donald Trump’s trade war, according to a source familiar with the issue.
Pan Gongsheng, governor of the People’s Bank of China (PBOC), touched on the issue with his South Korean and Japanese counterparts, Rhee Chang-yong and Kazuo Ueda, on the sidelines of the IMF-World Bank annual meetings in Washington last week, the source said.
“They have been pushing for trilateral cooperation, with talks going on for a while,” the person said on the condition of anonymity.
Currency swaps are an often-used tool between central banks to provide local currency liquidity. It can also offer financial relief during debt crises on top of rescue operations by multilateral institutions.
The policy discussions come amid a long-standing bid by China to boost the overseas use of the yuan in order to counter the US dollar and promote a free trade deal among the three East Asian nations, whose combined economic size accounts for a quarter of the world’s total.
South Korea and Japan, both close US allies that have also been ravaged by high tariffs from Washington, are China’s fourth and sixth largest trading partners in terms of 2024 trading value.
