Brazil's government said Wednesday it had reached an agreement with China to abandon the dollar and use their local currencies in their bilateral trade transactions.

The deal will allow China, the biggest rival of U.S. economic dominance, and Brazil, Latin America's largest economy, to make their massive trade deals directly, exchanging the yuan for the rial and vice versa, rather than relying on the dollar.

Brazilian trade and investment promotion agency Apexbrasil said in a statement that "there are expectations that this will reduce costs, further boost bilateral trade and facilitate investment."

China is Brazil's biggest trading partner, with trade worth about $150 billion last year.

The agreement was announced at a high-level Sino-Brazilian business forum in Beijing and follows a preliminary agreement in January.

China is Brazil's largest trading partner, with trade worth about $150 billion last year.

Brazilian President Luiz Inácio Lula da Silva was due to attend the forum, but was forced to postpone his visit to China due to pneumonia.

AFP quoted officials as saying that the Industrial and Commercial Bank of China and BPM Bank would carry out the transactions.

China has also abandoned dollar transactions with Russia, Pakistan and several other countries.

Chinese yuan maintains its position as the fifth most active currency in global payments (Shootstock)

Chinese Yuan Expands

Earlier, China's official Xinhua news agency reported that the yuan maintained its position as the fifth most active currency in global payments by value in February, according to a report by the Association for Worldwide Interbank Financial Telecommunication (SWIFT).

The yuan's global share stood at 2.19% in February, compared to 1.91% the previous month.

In terms of international payments, excluding the euro area, the yuan ranked eighth with a share of 1.48% last month.

According to World Bank base figures for 2021, China's GDP reached $17.7 trillion, representing 18.4% of global GDP in the same year, which amounted to $96.1 trillion.

China's merchandise exports amounted to $ 3.36 trillion in 2021, and its merchandise imports in the same year amounted to $ 2.68 trillion, which means that China's trade balance with the world results in a surplus estimated at $ 676 billion.