Turkey’s central bank allowed the payment of Chinese imports to be settled using the yuan on Thursday, the first time under a currency swap agreement between Turkey and China’s central banks, according to the Turkish central bank on Friday. 
According to the central bank, all payments made for imports from China via the bank were settled in the yuan, a move which will further strengthen cooperation between the two countries. 
Turk Telecom, one of the country’s largest telecommunications companies, also announced that it will use renminbi, or the yuan, to pay import bills. 
This is the first time that Turkey has used the funding facility for renminbi after a swap agreement with People’s Bank of China (PBoC) signed in 2019, amid increasing global financial uncertainties and liquidity pressure of the US dollar. 
Liu Xuezhi, a senior researcher at Bank of Communications told Global Times on Sunday that the currency swap agreements between central banks, which allow swapping of both the principals and interest payments from one currency to another, can reduce risks in times of elevated global interest fluctuations. 
“Without the swap agreement, countries and companies usually settle trade in US dollars,” Liu said, “And the US dollar as an intermediate currency is undergoing drastic fluctuation in its exchange rate, so it is natural for countries to trade directly in their currencies in order to lower the risks and costs.”
Liu also noted that the move to use the first funding facility under the agreement after its signature last May indicates further cooperation between Turkey and China as the impact of COVID-19 eases. 
Trade volume totaled $21.08 billion between China and Turkey last year, according to the statistics from China’s Ministry of Commerce. Imports from China recorded $18.49 billion, accounting for 9.1 percent of Turkey’s total import. Most of Turkey’s imports from China are electronic equipment, fabrics and chemical products, according to the statistics in 2018.
The PBoC has initiated and extended several currency swap agreements with other countries. In October last year, the PBoC extended its swap agreement with the EU to 2022, allowing a maximum of 350 billion yuan ($49.49 billion) of renminbi and 45 billion euros to be swapped. 
The swap agreement between China and Turkey was originally signed in 2012 and was extended in 2015 and 2019, allowing a maximum swap of 12 billion yuan of renminbi and 10.9 billion Turkish lira.