Drubbing the Dollar: China and Brazil ditch dollar, strike deal to settle trade in yuan, real

Beijing: ‘Doctor Doom’ Nouriel Roubini, who predicted 2008 global financial crisis, last month said dollar’s status as the world’s main reserve currency is in jeopardy and his words are standing true as Russia and China have agreed to ditch the US currency as an intermediary. Both the countries have now reached a deal to settle bilateral trade in their own currencies.

The trade deal is expected to reduce transaction cost between the two countries and is also seen as China’s latest salvo against the US dollar that has so far been enjoying the status of world’s main reserve currency.

De-dollarisation to boost China and Brazil trade

China is allegedly the top rival to US economic hegemony, while Brazil enjoys the biggest economy in Latin America. The two countries will now directly transact in yuan and real instead of dollar.

The deal follows a preliminary agreement in January which was announced after a high-level China-Brazil business forum in Beijing.

The Brazilian Trade and Investment Promotion Agency (ApexBrasil) in a statement said settling cross-border trade in yuan-real is expected to reduced costs, promote “even greater bilateral trade and facilitate investment.”

Also Read: US dollar fast losing out to the Chinese yuan, says ‘Doctor Doom’ Nouriel Roubini

The transactions will be executed by the Industrial and Commercial Bank of China and Bank of Communications BBM.

It is worth mentioning that China has similar currency deals with Russia, Pakistan and several other nations.

China-Brazil trade

China overtook the US in 2009 to become Brazil’s largest trading partner. Beijing accounts for more than a fifth of all imports in Brasília.

Also, China is Brazil’s largest export market, accounting for more than a third of all exports.

Brazil, currently, receives largest Chinese investment in Latin America, driven by spending on high-tension electricity transmission lines and oil extraction.

Swearing-in as Brazilian President in January this year Luiz Inácio Lula da Silva has moved to strengthen ties with China after a period of rocky relations under his predecessor, Jair Bolsonaro, who used anti-Beijing rhetoric on the campaign trail and in office.

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