Turkey and China have renewed a longstanding currency swap deal worth nearly $5 billion and agreed to establish a yuan clearing system in Turkey, in a move aimed at reducing dependence on the US dollar and deepening bilateral financial ties, Bloomberg reported.
The renewed agreement allows the Turkish and Chinese central banks to exchange up to 189 billion Turkish lira, or 35 billion Chinese yuan, over a three-year period, Turkey’s central bank announced on Friday.
Originally signed in 2012, the swap line has been extended multiple times as part of Ankara’s broader strategy to diversify foreign currency resources and facilitate trade in local currencies. The Turkish central bank said the arrangement was intended to ease settlements in lira and yuan and promote cooperation between the two monetary authorities.
Bloomberg reported that the swap deal could also help shore up Turkey’s depleted foreign currency reserves, which have come under strain in recent months. The central bank has been working to rebuild reserves after an estimated $50 billion decline earlier this year, triggered by political turmoil following the arrest of İstanbul Mayor Ekrem İmamoğlu, President Recep Tayyip Erdoğan’s key challenger.
In addition to the swap agreement, the two central banks signed a separate deal to set up a renminbi clearing mechanism in Turkey. The initiative is expected to simplify transactions for businesses by allowing direct trade in Chinese currency, without converting through US dollars or euros.
The Turkish central bank has not disclosed the specific timeline for when the clearing system will become operational.