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China and Brazil decide on arrangement to use own currencies instead of dollar

On Wednesday, the Brazilian government announced that it has reached a deal with China to trade in their own currencies, ditching the US dollar as an intermediary. Reducing dependence on the dollar, and increasing the circulation of the yuan (RMB), is one of China’s foreign policy directives in the context of trade disputes with the United States.

Recently, president Xi Jinping signed agreements with Saudi Arabia and Russia, allowing the use of the yuan in trade. The RMB has about 2% of participation in global payments, growing mainly around the Asian regional power.

At the end of January, the central banks of both countries signed a memorandum that established a “clearing house” in Brazil. In practical terms, the term refers to a bank chosen by the Chinese government – the ICBC – with liquidity in the Chinese currency to clear foreign exchange directly. There, businesses in Brazil can exchange yuan for the Brazilian currency.


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