China, Kazakhstan sign $1 billion currency swap deal

China agreed a $1 billion currency swap deal with Kazakhstan on Monday and forecast that annual trade between the countries would almost double to $40 billion in the next four years. The three-year currency swap deal, the latest in a series of bilateral agreements between China and its trading partners, was agreed by the central banks of both countries during a visit by Chinese President Hu Jintao.
China's growing clout in Kazakhstan and other former Soviet states in Central Asia is underpinned by billions of dollars of investment in the region's oil, gas and metals reserves. Chinese companies now control 22.5 percent of Kazakhstan's oil output. Beijing's foray across its 1,530-km (960-mile) border with Kazakhstan represents a challenge to Russia, which sees the country as part of its sphere of influence, as well as to European hopes it can be a major new supplier of resources.
"We agreed during our talks to increase foreign trade turnover to $40 billion by 2015," Hu told reporters after meeting Kazakh President Nursultan Nazarbayev. Nazarbayev, who has led Kazakhstan for more than 20 years, said trade with China had exceeded $5 billion in the first quarter of 2011. Trade between the two countries last year was worth more than $20 billion, he said.
Beisengali Tadzhiyakov, deputy head of Kazakhstan's central bank, told reporters the currency swap agreement would come into force by July 1. "After signing this agreement, we will open correspondent accounts and this sum will be digested in about three years," Tadzhiyakov said. "By doing so, we will bypass a third currency, for instance the US dollar."
China has signed bilateral currency swap deals with 11 other partners since the end of 2008 in moves to give the yuan a bigger international role. In April, it signed a 700 million-yuan swap deal with Uzbekistan. Energy ties between the two countries are of particular significance. Nazarbayev said the Kazakhstan-China oil pipeline delivered more than 11 million tonnes of crude to China last year and that the countries planned a second link to feed into a natural gas pipeline running from Turkmenistan to western China.
"The two sides will undertake joint efforts to ensure secure and stable functioning of Kazakh-Chinese oil and gas pipelines," Hu said. Nazarbayev also said Kazakhstan, the world's largest uranium miner, would this year begin supplying nuclear fuel pellets to China.