Brazil and China Advance Trade Integration Away From US Dollar as First Yuan Settlement Is Processed

Brazil and China have made a major step forward in their economic integration, as the first bilateral settlement in Chinese yuan was completed prior to the visit of President Luis Inacio “Lula” da Silva to China. Analysts have stated that this settlement, which was processed by the Industrial and Commercial Bank of China (ICBC), establishes an easier and more cost-effective way for companies to conduct payments between the two countries.

Brazil and China Move to Settle Trades Using Chinese Yuan

Brazil and China have been taking steps towards a tighter trade integration, with the first transaction being processed using the Chinese yuan. This was completed by the Industrial and Commercial Bank of China (ICBC), the bank that has been designated by the Chinese government to act as a clearing institution for Brazilian firms that are looking to use the yuan for international settlements.

The integration of the Chinese yuan into cross-border payments signifies a more convenient way for companies to be engaged in trade without including a third currency in the mix. Brazil and China inked an agreement last month to settle bilateral transactions using national currencies.

Guo Haiping, honorary president of the General Chamber of Chinese Entrepreneurs in Brazil, noted that the stability of the yuan was essential for these transactions, allowing institutions to save on exchange fees. He declared:

The yuan helps reduce the market risk as well as cut trading costs.

TLC, a Chinese electronics giant, told Global Times that with the integration of yuan settlements, investments are cheaper and less risky since they don’t require conversions to a third currency.

Lula Calls for Abandoning US Dollar as World Currency

The transaction occurred before the visit Brazilian President Luis Inacio ‘Lula’ da Silva made to his Chinese counterpart, President Xi, with analysts expecting more integration announcements, including the potential integration of Brazil into China’s “Belt and Road” initiative. This would involve injecting more capital into such mechanisms, to make them relevant for larger companies and settlements, according to Tang Jie, a Chinese researcher of Latin American affairs.

‘Lula’ has already called for the abandonment of the U.S. dollar as part of his statements during the appointment of former Brazilian President Dilma Rousseff as president of the New Development Bank in Shanghai, the so-called “BRICS bank.” In a speech at the event, ‘Lula’ stated:

I ask myself 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 about the combined steps Brazil and China are taking to de-dollarize? Tell us in the comments section below.

Sergio Goschenko

Sergio is a cryptocurrency journalist based in Venezuela. He considers himself late to the game, entering the cryptosphere when the price rise happened during December 2017. Having a computer engineering background, living in Venezuela, and being impacted by the cryptocurrency boom at a social level, he brings forth a distinct point of view about crypto success and how it assists the unbanked and underserved.

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