Brazil and China reached a milestone in economic integration when the first bilateral Chinese yuan-denominated settlement was completed ahead of President Luiz Inacio da Silva’s visit to China. The settlement, processed by the Industrial and Commercial Bank of China (ICBC), paves the way for cheaper and easier payments between the two countries, according to analysts.
Brazil and China move to settle trade in yuan
Brazil and China are moving toward closer trade integration with the first bilateral settlement using the renminbi. The first transaction was processed by the Industrial and Commercial Bank of China (ICBC), the bank designated by the Chinese government as the clearing house for Brazilian companies that decide to use the renminbi for international payments.
The integration of the Chinese renminbi in cross-border payments represents a simpler, new way for companies to engage in trade transactions without a third currency conversion factor. Brazil and China signed an agreement last month to settle bilateral transactions in their own currencies.
Guo Haiping, honorary president of the Chinese Entrepreneurs’ Assembly in Brazil, explained that the stability of the yuan is of paramount importance for these operations and helps financial institutions save on exchange fees. He declared:
RMB helps reduce market risks and transaction costs.
Chinese electronics giant TLC toldthe Global Timesthat the integration of yuan settlement will make investments cheaper and less risky, since conversion to a third currency will not be necessary.
Lula calls for the abandonment of the U.S. dollar as a world currency
. The deal came before Brazilian President Luiz Inacio da Silva’s visit to Chinese President Xi. Analysts expect further integration announcements, including possible integration of Brazil into China’s “One Belt, One Road” initiative. According to Tang Jie, a Chinese researcher on Latin American affairs, such a mechanism would require more capital to be invested, increasing the significance of large companies and settlements.
“Lula” has already called for the abandonment of the US dollar in remarks made by former Brazilian President Dilma Rousseff at her inauguration as president of the Shanghai New Development Bank, the so-called “BRICS Bank. In his speech at the event, “Lula” said:
Every night I ask myself why all countries have to trade on the basis of the dollar. Why can’t we trade using our own currency? Who decided that the dollar would be the dominant currency after the gold standard disappeared?
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