China, Brazil announce de-dollarization of mutual trade
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The two BRICS partners strike a deal to ditch USD with the aim of easing financial transactions between the two countries and reducing trade costs.
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Industry representatives from China and Brazil in a panel discussion at the Brazil-China Business Seminar (CCIIP)
China and Brazil struck a deal to ditch the US dollar in their bilateral transactions, which is expected to reduce investment costs and develop economic ties between the two countries, the Brazilian government stated on Wednesday.
The agreement between the Asian superpower and Latin America's largest economy - the mutual top trading partners - is a new financial and political strike against the green banknotes as more countries, with the growing geopolitical and economical influence of the East, are paving the way to distance themselves from the US politically-oriented currency.
Read more: De-dollarization: Slowly but surely
Earlier in January, both nations reached a preliminary deal on the matter that was finalized in a Brazil-China Business Seminar in China on Wednesday, which Brazil's President Luiz Inacio Lula da Silva was scheduled to take part in but failed to attend due to emergency health issues.
Read more: Future of global economy belongs to SCO, BRICS: Iran Econ Minister
"The expectation is that this will reduce costs... promote even greater bilateral trade and facilitate investment," Brazil's Trade and Investment Promotion Agency (ApexBrasil) said.
In 2022, trade volume between the economic giants hit a historic record of over $150.5 billion in bilateral trade.
China's Bank of Communications BBM (one of the country's top five banks) and industrial and Commercial Bank of China will oversee the execution of the deal, officials stated.
Earlier this month, US Treasury Secretary Janet Yellen said if the US defaults on its debt, this would result in a massive loss of confidence in the US dollar, eventually leading to the loss of its status as the world's global reserve currency - striking major market fears over the future of the world's safe haven currency.
Ditching USD roadmap
China and Brazil are two of the five founders of the BRICS bloc, which accounts for around 30% of the global gross output.
Last January, South African Foreign Minister Naledi Pandor announced that the BRICS club of emerging economies seeks to discover a way of bypassing the dollar to create a fairer payment system that would not be skewed toward wealthy countries.
"We have always been concerned at the fact that there is a dominance of the dollar and that we do need to look at an alternative," he said then.
Recently, a handful of medium-sized economies aimed to join the bloc: Argentina, Algeria, Iran, Indonesia, Turkey, Saudi Arabia, and Egypt.
The gigantic bloc announced a few days ago that it will establish a “geological platform” that aims to allow the BRICS member states to coordinate in regard to their mineral reserves and extraction methods in light of the increasing demand for natural resources.
