China, South Korea reach 180b yuan currency swap deal

The globalization has decreased the boundaries between the countries generating free flow of information, culture as well as exchange in capital and goods. This has allowed countries to keep close relationship in the economy which is one of the main reasons that created the spilover effect of the financial crisis.

Among the countries that are influenced by the global financial crisis, one of them is Asian countries. The effect of the global financial crisis has brought devistation in the Asian economy which resulted in slowing of ecnomic growth and decrease in export. To minimze the effect and to recover from the devistations, Asian economies have beem imposing policies to help out the financial sector as well as to keep the confidence level relatively high to maintain the demand for goods. Similar to the bailout plan, one of the plans that Asian countries created is the 180bilion Yuan currency swap deal.

According to this article, China and South Korea have reached a deal regarding currency swap of 180 bilion yuan which is about 26.28 billion dolars. The deal is expected to last for thre years and can be extended with agreements of both sides. The aim for this policy is to proide adequate liquidity for financial systems of the two major East Asian economies.

However, as the Korean won has depreciated by more than 30% this year due to the spread of the financial crisis, the curency swap would definately provide more stable won value as it proivides South Korea with more liquidity to stabilize its curency.

Personally, this is a very good news for me as all of my familes are back in Korea. There has been many policies imposed by the Korean goverment including the currency swap with the Federal Reserve of U.S., but it has not been enough to provide stabilization in the econmy. As Korea and U.S. has been keeping a very close relatioship historically, any deviation in U.S. can have significant and immediate effect in Korean economy. I hope further policy can be implemented to stabilize the economy in Korea.