China and Brazil signed an agreement on March 29 that would abandon the U.S. dollar and carry out trade and financial transactions directly in yuan for reals—and vice versa—a significant step as China, the world’s second-largest economy, continues to accelerate the currency’s presence in the international market.
Both countries noted that they had reached a preliminary agreement to ditch the dollar in January.
The new agreement makes sense for both sides, experts say. China has been Brazil’s top trading partner for more than a decade, representing roughly one-fifth of all imports. China is also the South American nation’s largest export market.
The objective of the arrangement, officials assert, is to slash costs and “promote even greater bilateral trade and facilitate investment.”
“Banco BOCOM BBM announces its membership of CIPS (China Interbank Payment System), which is the Chinese alternative to Swift,” the Brazilian Trade and Investment Promotion Agency (ApexBrasil) said in a statement. “The expectation is the reduction of the costs of commercial transactions with the direct exchange between BRL (real) and RMB (renminbi). The bank will be the first direct participant in this system in South America.”
The Industrial and Commercial Bank of China and Bank of Communications BBM will manage the transactions.
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