China gives the go-ahead to forex options and cross-currency swaps

China permitted the trading of onshore cross-currency swaps by end-users in March and the purchase of forex options by corporates in April. Market participants see the move as part of a gradual expansion of hedging instruments being made available in mainland China.

China’s national currency regulator, the State Administration of Foreign Exchange (Safe), gave the go-ahead on January 31 for corporate end-users in the country to trade onshore cross-currency swap (CCS) transactions from March 1. A cross-currency swap is an interest rate swap in which the counterparties of the transaction exchange their cash flows in different currencies. Upon initiation of a cross-currency swap, the counterparties make an initial exchange of notional principals in the two