The two sides could provide financial aid to each other when facing "short-term liquidity needs", said an unidentified sources with the PBOC.

The agreements would also enhance bilateral trade by increasing import demand of commodities from the opposite side and saving the exchange cost for the exporters from both sides, said sources.

Conducting currency swap with other countries shows China's fulfillment of its responsibility amid the global crisis and its contribution to a stable regional currency system, said Zhang Yansheng, head of the International Economic Research Institute under the National Development and Reform Commission.

Why choose China?

"China's trading partners have been confident about the stability of both the yuan and China's economy," said Zhang, noting that China's economy is basically sound with adequate foreign exchange reserves and a stable currency.

China has been the world's top foreign exchange owner as its foreign exchange reserves climbed 27.3 percent in 2008 to US$1.9 trillion, according to PBOC figures.

China has also maintained its status as the fastest growing economy despite the fact that its economic growth slowed to nine percent last year, and economists believe that China will be the first to revive from the global crisis.

"Currency swaps have promoted the use of the yuan in international finance and trade through the recent agreements," Zhao said.

However, experts also point out that the yuan still has a long way to go to become a new world currency.

China would consider the current situation of bilateral trade, investment and economic cooperation, as well as the stability of the financial system when picking its next partner, said Chai Yu.

The three currency swap contracts have an effective period of three years, and both the scale and the length of agreements could be extended upon agreement by both parties, said Chai.

(Xinhua News Agency February 16, 2009)