The agreement was signed on Tuesday in Beijing during a meeting between visiting NRB Governor Yubaraj Khatiwada and PBoC Governor Zhou Xiaochuan. The deal is expected to further facilitate trade between the two countries.

NRB Deputy Governor Gopal Kafle said that the currency swap deal was on the agenda of the governor’s visit but he was not fully informed about what kind of agreement took place in Beijing.

According to him, Nepal had proposed to the Chinese central bank to sign such an accord considering the increased trade and investment besides higher flow of Chinese tourists to Nepal.

Earlier, in June 2013, the two central banks had signed a memorandum of understanding paving the way for Nepal to invest in Chinese securities.

Nilkantha Chaulagain, president of the Nepal Trans-Himalayan Border Commerce Association, said that the swap deal was positive for cross-border trade and stressed that it should be expanded to cover all levels of trade.

“Currently, we have to pay for our purchases in China in US dollars, and allowing the use of Nepali currency in China will be very helpful to us,” he added.

Trade between the two countries has expanded in recent years with the northern neighbour becoming Nepal’s second largest trade partner. During the first four months of the current fiscal year, bilateral trade amounted to Rs 33.62 billion, according to NRB. Moreover, China made the largest foreign investment commitment in the last fiscal year, according to the Department of Industry. Chinese investors pledged investments totalling Rs 7.31 billion against India’s Rs 6.54 billion.