In a move to “reduce costs” and promote “bilateral trade,” China and Brazil have signed an agreement to trade in their own currencies, bypassing the U.S. dollar as an intermediary.
The deal will allow both nations to conduct their trade and financial transactions directly, exchanging yuan for reais and vice versa, instead of using the dollar for settlements.
The announcement was made after a high-level China-Brazil business forum in Beijing.
The Industrial and Commercial Bank of China and Bank of Communications BBM will execute the transactions, officials said.
China is Brazil’s largest trading partner, with a bilateral trade volume of $150.5 billion last year.
“The expectation is that this will reduce costs… promote even greater bilateral trade and facilitate investment,” said the Brazilian Trade and Investment Promotion Agency (ApexBrasil).
The two countries also announced the creation of a clearinghouse that will provide settlements without the U.S. dollar, as well as lending in national currencies.
The move aims to facilitate and reduce the cost of transactions between the sides and eliminate dollar dependence in bilateral relations.
According to the Secretary for International Affairs at the Ministry of Finance of Brazil, Tatiana Rosito, 25 countries already make settlements with China in yuan.
This deal marks China’s latest move against the U.S. dollar’s economic hegemony, following similar currency deals with Russia, Pakistan, and other countries.
The agreement follows a preliminary deal in January and marks a significant step towards China’s goal of reducing the dollar’s dominance in international trade.
Despite the postponement of Brazilian President Luiz Inacio Lula da Silva’s visit to China due to pneumonia, the deal shows the strong and growing economic ties between the two countries.