Judging by some of yesterday's newspaper headlines from around the world you would think China had usurped the United States to become the globe's dominant financial superpower in a sneaky surprise attack. 'Beijing strikes in currency war,' screamed The Australian. 'China making deals to weaken the dollar,' shrilled The Times of India. Hardly. Even allowing for journalistic hyperbole, these headlines are just plain silly. What actually happened was that People's Bank of China governor Zhou Xiaochuan signed a 'framework agreement' with the Central Bank of Argentina on a 70 billion yuan (HK$79.39 billion) currency swap. Beijing has signed six such deals over the last three months. In December, the PBOC struck a 180 billion yuan deal with South Korea. Then in January, it signed a 200 billion yuan swap pact with our very own Hong Kong Monetary Authority. Other agreements with Malaysia, Indonesia and Belarus followed, culminating in Tuesday's deal with Argentina, which brought the total value of the agreed swaps to 650 billion yuan. More swap deals are expected to follow. In theory, these agreements allow the central banks to borrow yuan from the PBOC, lending an equivalent amount of their own currencies in return. The key words here are 'in theory', because none of the facilities have yet been drawn down. Nor are they likely to be drawn down for some time, partly because no one seems quite certain what these agreements are actually for. That was most apparent on Monday. Announcing the Argentine deal, the PBOC claimed its swaps would 'promote bilateral trade and direct investment and drive economic growth'. Foreign companies, it explained, would be able to pay for their imports in yuan, 'which will effectively avoid exchange rate risks'. That will come as news to importers in Argentina, which does not - as of yesterday at least - peg its currency to the yuan. It will also be a surprise to Central Bank of Argentina governor Martin Redrado, who clearly has different ideas about what the swap is for. He appears to regard it as a contingency measure to bolster Arentina's foreign reserves in case of emergency. 'This is a standby,' he said, according to Reuters. 'Argentina does not need it.' In fact, yuan swaps wouldn't be much good either for paying for imports or for bolstering foreign-exchange reserves. You can't pay for imports from China in yuan, because Chinese exporters aren't supposed to accept payment in their own currency. And although Beijing has announced its intention to allow trade between Guangdong and Hong Kong to be settled in yuan at some point in the future, we have yet to hear any details about the trial scheme. And because the yuan is not freely convertible, there is no international market in it, which means you couldn't sell yuan to defend your own currency in a balance of payments crisis. That accounts for press reports that the Bank of Korea is trying to renegotiate its own swap agreement with the PBOC so it can get its hands on US dollars rather than yuan. The yuan is no good for intervention. The real purpose of these swap deals is political. They symbolise China's new-found assertiveness on the world's economic and financial stage. Of course, as Beijing slowly permits greater yuan convertibility, the currency may acquire a small role in international trade settlement and even a minor place as a reserve currency. But progress will be painfully slow. Even in Hong Kong, where yuan deposits are permitted, there is no great enthusiasm for holding the currency. As the charts below show, the amount of yuan on deposit in the city has declined since the PBOC halted the currency's appreciation last summer. Meanwhile, the development of the yuan debt market has stalled since September last year, with just 13 billion yuan of bonds outstanding. Interest will pick up again. But the yuan remains decades away from establishing itself as an international currency. And even then, its primacy is likely to be limited to China's East Asian neighbours, in much the same way as the euro, although freely convertible, has replaced the US dollar as the trade settlement and reserve currency of choice only in Eastern Europe and North Africa. So although 'Beijing strikes in currency war' makes an eye-catching headline, it is many, many years premature.