Australia's central bank plans to invest some of its foreign currency reserves in Chinese government bonds for the first time, part of a wider move to deepen financial ties with the country's biggest trading partner.
Reserve Bank of Australia (RBA) deputy governor Philip Lowe said the bank intended to hold around 5% of its foreign currency assets in China and had already gained approval from its Chinese counterpart, the People's Bank of China.
The RBA's foreign currency reserves are currently worth around A$38.2 billion ($39.2 billion). This decision to invest in China is an important one, Lowe told the Australian Chamber of Commerce in Shanghai.
"It reflects the broader economic relationship between China and Australia and our increasing financial ties. It provides greater diversification of our investments and will help with our understanding of the Chinese financial markets."
The Chinese yuan, once liberalised, is likely to become one of the major reserve currencies in the region, he added. This will be the first time the conservative central bank will have invested directly in a sovereign bond market of an Asian country other than Japan.
The RBA's move comes at a time when China is aggressively promoting the use of its currency in international trade and following a relaxation of foreign investment quotas and easier access to onshore Chinese markets.
Lowe also highlighted the recent launch of direct trading between the Chinese yuan and Australian dollar, increasing investment flows between the two countries as well as growing interest in using the yuan for trade settlement.
indiatimes.com
Reserve Bank of Australia (RBA) deputy governor Philip Lowe said the bank intended to hold around 5% of its foreign currency assets in China and had already gained approval from its Chinese counterpart, the People's Bank of China.
The RBA's foreign currency reserves are currently worth around A$38.2 billion ($39.2 billion). This decision to invest in China is an important one, Lowe told the Australian Chamber of Commerce in Shanghai.
"It reflects the broader economic relationship between China and Australia and our increasing financial ties. It provides greater diversification of our investments and will help with our understanding of the Chinese financial markets."
The Chinese yuan, once liberalised, is likely to become one of the major reserve currencies in the region, he added. This will be the first time the conservative central bank will have invested directly in a sovereign bond market of an Asian country other than Japan.
The RBA's move comes at a time when China is aggressively promoting the use of its currency in international trade and following a relaxation of foreign investment quotas and easier access to onshore Chinese markets.
Lowe also highlighted the recent launch of direct trading between the Chinese yuan and Australian dollar, increasing investment flows between the two countries as well as growing interest in using the yuan for trade settlement.
indiatimes.com
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