In the latest blow to the US dollar, the Chinese central bank is preparing to set up a yuan payment system with Brazil, in an effort to bolster its currency and reduce reliance on the greenback.
As first reported by Reuters, the People’s Bank of China earlier this week announced it entered into a memorandum of understanding to create yuan clearing arrangements with Brazil. Chinese customs data showed that trade between Brazil and the communist country hit $172 billion last year; the central bank reasoned that the move would make such cross-border transactions with the South American country easier, and boost bilateral trade and investments.
China has already entered into similar agreements with Kazakhstan, Pakistan, and Laos. The communist nation recently reignited its mission to strengthen the yuan and challenge the US dollar’s global dominance. In January, the PBOC purchased an additional 15 tonnes of gold, after already buying a combined 62 tonnes in the prior two months.
The development meanwhile follows discussions between Brazil and Argentina to establish a common currency for the region in an effort to push de-dollarization. The move is being conducted in an effort to “boost regional trade and reduce reliance on the U.S. dollar.”
“There will be . . . a decision to start studying the parameters needed for a common currency, which includes everything from fiscal issues to the size of the economy and the role of central banks,” Argentina’s economy minister Sergio Massa told the Financial Times.
With a proposed name of “Sur” for the currency, which in Spanish means south, the currency is said to currently be a bilateral product that would later be expanded to other Latin American nations, similar to how the Euro is utilized across Europe.
Information for this briefing was found via the Reuters and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.