Brasília, 30 March 2023 (TDI): On Wednesday, China, and Brazil announced a deal to trade using their respective currencies ditching the United States (US) dollar as an intermediary, said the Brazilian government.
As the statement suggests, the companies in both countries will conduct trade transactions using the Chinese Yuan and the Brazilian Real, instead of relying on the US dollar as the intermediary currency.
Moreover, the Brazilian Trade and Investment Promotion Agency; ApexBrasil, stated that the deal concluded by both sides would help reduce both sides’ costs and facilitate mutual investment.
Thus, the Industrial and Commercial Bank of China and Bank of Communications BBM will execute the transactions, officials said.
According to Brazilian officials, the deal with China will diversify Brazil’s trade partners and reduce its reliance on exports to the United States, which has historically been its largest market.
China, on the other hand, sees Brazil as a key partner in its efforts to expand its economic influence in Latin America. Therefore, China invested approximately US $ 150.
5 billion in bilateral trade last year as its biggest trading partner.
Moreover, the deal is not just with Brazil; China has similar currency deals with France, Russia, and Pakistan as well. Notably, China is now buying oil from Russia in their currency and brokered a deal between the Saudis and Iran.
The move is significant as it is part of a broader trend of countries seeking to reduce their dependence on the US dollar in international trade.
China has been particularly promoting the use of the yuan as a global currency and establishing a network of currency swap agreements with other countries.
Overall, the officials of both sides expect the deal to strengthen not only economic ties between China and Brazil but also provide new opportunities for companies in both countries.
By reducing their reliance on the US dollar, the agreement also represents a step towards a more multipolar global economy.