China and Indonesia announced a 100 billion-yuan-rupiah currency swap on Wednesday October 2, to promote trade settlements in local currencies. As a business student, I want to learn about what is swap currency and how it works for both two countries. My research and analysis show that swap currency is considered to be a foreign exchange transaction. A swap involves the exchange of principle and interest in one currency for the same in another currency.

The swap arrangement signed back in 2009 was designed to stabilize Indonesia’s economy during the 2009 economic crisis and be extension sustain two-way trade and investment. So we can draw a conclusion that the swap currency can be used to against financial risk. As a matter of fact, the swap did indeed manage to move the Indonesian economy away from turbulence in 2009. And this time, China and Indonesia can make a constant and stable current cooperation between each other.

The need to renew the swap agreement caused by the latest US financial policy. The potential risks make other countries in the world feel under pressure. There is no doubt that swap currency is a efficient way to protect themselves. The two countries have also made remarkable progress in cooperation in such fields as science and technology, education, culture, people-to-people exchanges, defense, maritime affairs and aerospace.So international cooperation plays a significant role in this specific period.
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