The arrangement has a maximum size of CNY 350 billion and €45 billion and can serve as backstop renminbi liquidity facility for euro area banks.
In a statement on the renewal, the ECB said: “Liquidity providing arrangements contribute to global financial stability. The arrangement with the PBC is a recognition of the rapidly growing bilateral trade and investment between the euro area and China.”
The agreement’s extension comes after the ECB and PBC conducted two tests in April and November 2015 that provided symbolic amounts of euro and renminbi liquidity respectively.
According to the ECB, these tests were successful and demonstrated the central banks’ “operational readiness to activate the swaps if needed on the basis of bilaterally agreed operational procedures”.