Brazil, China Move Away from US Dollar, Complete First Yuan Settlement
• Brazil and China have completed their first bilateral settlement using the Chinese yuan, processed by the Industrial and Commercial Bank of China (ICBC).
• This milestone is part of a wider effort to deepen economic integration between the two countries and move away from relying on the US dollar.
• The transaction was finalized ahead of President Luis Inacio “Lula” da Silva’s visit to China, with further integration initiatives believed to be announced during his visit.
Brazil and China Deepen Trade Integration
Brazil and China have reached a milestone in their economic integration, as the first bilateral settlement in Chinese yuan was completed ahead of the visit of President Luis Inacio “Lula” da Silva to China. The settlement, which was processed by the Industrial and Commercial Bank of China (ICBC), paves the way for cheaper and simpler payments between the countries.
Yuan-Based Settlement Processed
Brazil and China have moved towards a tighter trade integration, having processed their first bilateral settlement using the Chinese yuan. The first transaction was processed by ICBC, designated by the Chinese government to act as a clearing institution for Brazilian companies determined to use the yuan for international settlements. This eliminates exchange fees and helps reduce market risk associated with currency conversions.
Abandoning US Dollar World Currency
The transaction came before Lula’s visit to his Chinese counterpart, President Xi, with analysts expecting more integration announcements including Brazil’s potential involvement in China’s „Belt and Road“ initiative. Lula has already called for abandoning U.S. dollar as world currency when appointing former Brazilian President Dilma Rousseff president of Shanghai’s New Development Bank.
Benefits Of Yuan Integration
The stability of yuan is paramount in these operations, helping institutions save on exchange fees according to Guo Haiping, honorary president of General Chamber of Chinese Entrepreneurs in Brazil. TLC, a Chinese electronics giant explained that with this integration investments are cheaper and less risky because they don’t require conversions into third currencies anymore.
The completion of this milestone signals brighter prospects for future economic ties between both countries in terms of trade transactions without including third currency conversion factors. It remains unclear what other initiatives will be discussed during Lula’s visit but it is expected that they will further strengthen their collaboration efforts moving forwards