By Li Hongmei

China accelerated plans to internationalize its currency yesterday by agreeing to swap euros and yuan with the European Central Bank in a deal that is set to be China's second-largest to date.

The bilateral currency swap agreement between the ECB and the People's Bank of China is valid for three years and has a maximum size of 350 billion yuan (US$60.8 billion).

The deal is the latest of a string of currency swaps that China has created with other nations to promote the yuan's use in global commercial and financial transactions.

"The emphasis is on yuan internationalization," said Louis Kuijs, an RBS economist in Hong Kong.

He said currency swaps also provide central banks with additional liquidity in times of financial emergencies, though this function is of secondary purpose in China's swap agreements.

The swap agreement with the ECB is China's second-biggest with a foreign central bank, after South Korea's 360 billion yuan swap line.

As China's largest trade partner, Europe is a natural destination for Beijing in raising the yuan's profile. The interest is reciprocated by some European nations such as Britain and Germany which want to be the clearing center for the yuan in Europe and provide what may be a lucrative financial service.

The yuan is now the world's eighth most-traded currency, financial services provider SWIFT said this week, with a market share of 1.5 percent and overtaking the Swedish krona, the South Korean won and the Russian rouble.

China's swap deal with the ECB comes after French President Francois Hollande said in June that France is working on setting up a currency swap line with the world's No. 2 economy.

Bank of France Governor Christian Noyer welcomed the agreement yesterday.

"Banks in the eurozone and France will henceforth have the security they need to develop their activities in yuan over the long term," Noyer said in a statement.