China Advances Yuan Use for Settlements, Inks Deals With Brazil and France
• China is attempting to position the yuan as a viable alternative to the US dollar for settling international payments.
• The Chinese government recently agreed to settle trades with Brazil using their respective national currencies, and completed its first LNG purchase with a French company using yuan as payment.
• For full adoption of the yuan, analysts believe that China needs to implement new policies such as its proposed CBDC.
China’s Push for Yuan Adoption
China is looking to make the yuan a viable alternative to the US dollar for international settlements. Recently, it has taken two steps towards this goal: striking a bilateral deal with Brazil allowing them to use their own national currencies in trade; and completing an import of 65,000 tons of Liquefied Natural Gas (LNG) from France settled in yuan currency.
Bilateral Deal With Brazil
The deal between Brazil and China allows them to exchange goods using either currency and could lead to reduced costs when trading between the two countries, facilitating investment along the way. In 2022 alone, bilateral trade between the two nations reached $150 billion with China being Brazil’s biggest trading partner.
Yuan-Settled LNG Purchase
The second milestone was achieved when China National Offshore Oil Corporation (CNOOC) purchased 65,000 tons of LNG from Totalenergie based in France. This transaction was conducted on Shanghai Petroleum & Natural Gas Exchange involving Arabian-origin fuel and marked CNOOC’s commitment towards innovation when it comes to pricing and settlement methods.
CBDC Key for Yuan Growth
Analysts have noted that while these recent developments are notable steps towards global adoption of yuan as an alternative to US dollars, more efforts are needed before it can become mainstream – one example being implementation of innovative policies such as Central Bank Digital Currency (CBDC).
In conclusion, China has been taking measures towards positioning its fiat currency -the yuan- as a competitor against US dollar in international settlements. Through recently signed deals with countries like Brazil and France, China is making strides in achieving this goal but full adoption will likely require further innovative policies like CBDC implementation for broader acceptance across other nations worldwide.