China and the United Arab Emirates extended their currency-swap agreement on Tuesday and a Chinese bank listed bonds on a Dubai stock exchange a day earlier, as UAE-China business ties continue to strengthen.
The Central Bank of the UAE and the People’s Bank of China renewed the $4.9 billion agreement for five years with the purpose of facilitating financial and trade cooperation. The two also signed a memorandum of understanding on enhancing technological cooperation with regard to the development of central bank digital currencies, the UAE Central Bank said in a press release.
A currency swap is an exchange of interest and principal in one currency for the same amount in another. Countries may engage in currency-swap agreements so their businesses operating overseas can obtain a more favorable loan rate in the local currency than if they borrowed from a local bank, according to Investopedia.
The UAE and China first signed a currency-swap agreement in 2012 and have since renewed it several times.