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The Central Bank of Britain said on its website that the two sides would work together to facilitate discussions on signing the agreement.
Trading in swaps is a means for two countries to exchange a specific amount of each currency, followed by a payment of interest.
The currency swap agreement would be used to finance trade and direct investment between China and Britain, the statement said.
Currency swapping of the Chinese renmimbi, also known as the yuan, with the British pound increased by 240 per cent in the first half of 2012 compared to a year earlier, according to the City of London Corporation.
Sir Mervyn King, Bank of England governor, who is on an official visit to China and met People’s Bank of China governor Zhou Xiaochuan on Friday, said that the agreement will also help support Britain’s domestic financial stability.
London has been vigorously promoting its role in offshore RMB (renminbi) business with the aim to become an offshore RMB center. The City of London launched an initiative to facilitate this goal in April last year.
The Corporation, which is the municipal governing body of most of the UK’s financial sector, also said that daily currency swaps of the yuan, also known as the renminbi, had reached nearly $3.1 billion a day as China’s currency gained more traction in international markets.