China News Network, March 3 (Zhongxin Finance Peng Jingru) RMB ushered in important news!

Brazil announces direct local currency settlement with China

According to Fox Business on the evening of the 29th, Brazil has reached an agreement with China to no longer use the US dollar as an intermediate currency, but to trade in its own currency.

The deal allows China and Brazil to engage directly in large-scale trade and financial transactions, exchanging yuan for real and vice versa, rather than through the dollar.

Brazil's Trade and Investment Promotion Agency (ApexBrasil) said: "This is expected to reduce costs while promoting greater bilateral trade and facilitating investment." ”

The latest data show that China is Brazil's largest trading partner, accounting for more than a fifth of Brazil's total imports, followed by the United States. China is also Brazil's largest export market, accounting for more than a third of Brazil's total exports.

Screenshot of the Fox Business website report.

Teixeira, former Minister of Trade of Brazil and former President of the World Association of Investment Promotion Agencies, said on the 30th that this agreement is conducive to commercial exchanges between the two countries, especially it will bring great convenience to small and medium-sized enterprises in the two countries. SMEs are limited in size, and some do not even have international bank accounts (which means that it is not convenient for them to exchange US dollars), but these companies need international supply chains as well as international markets, and the use of local currency settlement between Brazil and China is an important step.

Chinese Foreign Ministry spokesman Mao Ning said at a regular press conference on the 30th that China and Brazil signed a memorandum of cooperation on the establishment of RMB clearing arrangements in Brazil at the beginning of this year, and the establishment of Brazilian RMB settlement arrangements is conducive to enterprises and financial institutions in China and Brazil using RMB for cross-border transactions and promoting bilateral trade and investment facilitation.

These countries have also begun to discuss abandoning dollar settlements

China News Finance noted that some ASEAN countries have also begun to discuss abandoning US dollar settlement and switching to regional currencies.

According to the "ASEAN Briefing" website (ASEAN Briefing) on the 29th, on March 3, the formal meeting of ASEAN finance ministers and central bank governors opened in Indonesia. The first topic of the meeting was to discuss how to reduce the dependence on the US dollar, the euro, the Japanese yen and the British pound for financial transactions and move to local currency settlement.

Screenshot of the ASEAN Briefing website.

The meeting discussed efforts to reduce dependence on major currencies through the Local Currency Trading (LCT) program, an extension of the LCS program that had previously begun to be implemented among ASEAN member countries.

This means that the ASEAN cross-border digital payment system will be further expanded and allow ASEAN countries to trade in local currencies. Indonesia, Malaysia, Singapore, the Philippines and Thailand agreed on such cooperation in November 2022. Earlier, Indonesia's banking regulator said on March 11 that Bank Indonesia was preparing to launch its own domestic payment system.

Today's Russian TV website reported on January 1 that the Russian Foreign Minister said that about half of the trade between Russia and China is settled in the local currencies of the two countries, and this proportion is rising rapidly.

Iraq's central bank announced in February 2023 the latest measures to improve its foreign exchange reserves, including allowing direct settlement of the country's trade with China in renminbi.

Expert: The overseas influence of RMB has increased

According to the client news of Beijing Daily, Zhou Mi, deputy director of the Institute of Americas and Oceania of the Research Institute of the Ministry of Commerce, said that local currency settlement is conducive to reducing the impact of financial fluctuations, providing a stable trade environment and market expectations for both sides, and also indicating that the overseas influence of the RMB is increasing.

Zhou Mi said that a large part of the trade between China and Brazil is commodities, and the historical trading pattern has been formed in US dollar terms. This trading model is an external factor that is uncontrollable for both parties. Especially in the recent period, the US dollar has been continuously appreciating, resulting in a relatively negative impact on Brazil's export earnings. In addition, many trades are not settled in the current period, based on expectations for the future, which may cause further declines in future earnings.

In addition, it is carefully emphasized that local currency trading is gradually becoming a trend, and more countries are considering not relying solely on the US dollar in international trade, but increasing the opportunity to choose other currencies according to their own needs and development. At the same time, it also shows to a certain extent that the overseas influence of the RMB is increasing, and its acceptance is also increasing.

Infographic RMB. Photo by China News Network reporter Jin Shuo

Recently, China has also taken an important step in the exploration of RMB settlement transactions.

According to Xinhua News Agency, on the 28th, China's first imported liquefied natural gas (LNG) procurement transaction settled in RMB was reached. It is understood that this single transaction was reached between CNOOC and Total Energy in the Shanghai Oil and Gas Exchange Center, LNG resources from the GCC country of the United Arab Emirates, and the volume of imported LNG settled in RMB is about 6,5 tons.

Chen Guozhong, chief economist of the Shanghai Municipal Development and Reform Commission, said that the RMB settlement of international LNG trade between Shanghai Oil and Gas Trading Center and CNOOC is conducive to promoting the docking of international and domestic markets, as well as the efficient circulation of resources at home and abroad. (End)