The Ministry of Economy and Finance on Oct. 22 said the central banks of Korea and China agreed to extend their currency swap for five more years and raise its value to KRW 70 trillion. (Yonhap News)

By Xu Aiying and Lee Hana

Korea and China have extended a bilateral currency swap and raised its value. 

The Ministry of Economy and Finance on Oct. 22 said the central banks of both countries concluded a deal to extend and expand the size of the swap.

The deal had initially been extended three years but the two sides raised the period to five years, or until Oct. 10, 2025, and increased the value from KRW 64 trillion to KRW 70 trillion.

The swap is one of China's largest along with that with Hong Kong worth RMB 100 billion (KRW 17 trillion).

A currency swap allows a financially troubled country to borrow funds in its own currency from other nations in exchange for the equivalent amount in foreign currency. A bilateral swap's goals are boosting trade and commerce, stabilizing financial markets and supporting the liquidity of financial institutions based in the partner country.

The ministry said in a statement, "Extending the deal has reduced uncertainty that could arise with each new extension. With international financial markets extremely volatile at this time, a currency swap allowing a country to cover trade costs in its own currency will contribute to financial security in the region."

xuaiy@korea.kr