Brazil and China have reached a milestone in their economic integration, as the first bilateral agreement in Chinese yuan was completed ahead of President Luis Inácio “Lula” da Silva’s visit to China. The deal, which was processed by the Industrial and Commercial Bank of China (ICBC), paves the way for cheaper and easier payments between the countries, according to analysts.
Brazil and China move to settle trades using the Chinese yuan
Brazil and China have moved towards closer trade integration, having processed their first bilateral deal using the Chinese yuan. The first transaction was processed by the Industrial and Commercial Bank of China (ICBC), the bank designated by the Chinese government to act as a clearinghouse for Brazilian companies determined to use the yuan for international settlements.
The integration of the Chinese yuan into cross-border deals signals a new and easier way for companies to engage in business transactions without including a third currency conversion factor. Brazil and China signed an agreement last month to settle bilateral transactions using national currencies.
Guo Haiping, honorary president of the General Chamber of Chinese Entrepreneurs in Brazil, explained that the stability of the yuan was paramount in these operations, helping institutions save on exchange rates. He declared:
The yuan helps reduce market risk as well as lower trading costs.
TLC, a Chinese electronics giant, said global times that with the integration of yuan settlements, investments are cheaper and less risky because they do not require conversions to a third currency.
Lula calls to abandon the US dollar as world currency
The transaction came ahead of Brazilian President Luis Inácio ‘Lula’ da Silva’s visit to his Chinese counterpart, President Xi, and analysts were expecting further integration announcements, including the possible integration of Brazil into the “Belt and Road” from China. This would mean putting more capital into such mechanisms, to make them meaningful for larger companies and settlements, according to Tang Jie, a Chinese researcher on Latin American affairs.
‘Lula’ has already called for the abandonment of the US dollar as part of his statements during the appointment of former Brazilian president Dilma Rousseff as president of the New Development Bank of Shanghai, the so-called “BRICS bank”. In a speech at the event, ‘Lula’ stated:
I wonder every night why all countries have to base their trade on the dollar. Why can’t we trade using our own currencies? Who decided that the dollar would be the dominant currency after the gold standard disappeared?
What do you think of the joint actions focused on de-dollarization that China and Brazil are currently taking? Tell us in the comment section below.
image credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. It is not a direct offer or a solicitation of an offer to buy or sell, or a recommendation or endorsement of any product, service or company. bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
