Surpass the euro! The yuan has become the second largest foreign exchange reserve currency in this large country

By the end of 2022, the yuan accounted for 5.37% of Brazil's total foreign exchange reserves, surpassing the euro's 4.74% share, and the dollar continued to dominate at 80.42%.

Brazil announces direct local currency settlement with China

According to the Global Times on March 30, according to AFP and other foreign media reports on the 30th, the Brazilian government said on Wednesday that Brazil has reached an agreement with China to no longer use the US dollar as an intermediate currency, but to settle trade in the local currency. The report described this as Beijing's "latest surprise attack" on the US dollar. According to Chinese customs statistics, the bilateral trade volume between China and Brazil in 2022 was 171.49 billion US dollars, an increase of 4.9% year-on-year.

According to the Global Times, Agence France-Presse and other reports, the agreement allows China, the top rival of the United States' economic hegemony, and Brazil, the largest economy in Latin America, to conduct large-scale trade and financial transactions directly, exchanging yuan for real and vice versa, rather than through the dollar.

"This is expected to reduce costs while facilitating greater bilateral trade and facilitating investment," the Brazilian Trade and Investment Promotion Agency (ApexBrasil) said in a statement.

On March 30, Foreign Ministry Spokesperson Mao Ning hosted a regular press conference. A reporter asked, on March 29 local time, a statement from the Brazilian Trade and Investment Promotion Agency (ApexBrasil) quoted by the Brazilian Foreign Ministry announced that Brazil has reached an agreement with China to conduct bilateral trade transactions in local currency instead of US dollars. Can the Foreign Ministry provide more details?

Image source: Ministry of Foreign Affairs website

Mao Ning said that China and Brazil signed a memorandum of cooperation on the establishment of RMB clearing arrangements in Brazil at the beginning of this year. We feel that the establishment of RMB clearing arrangements in Brazil is conducive to the use of RMB by enterprises and Financial Institutions Groups of China and Brazil to conduct cross-border transactions and promote bilateral trade and investment facilitation.

According to Xinhua News Agency on March 25, China has been Brazil's largest trading partner for 14 consecutive years. Brazil is also the first Latin American country to exceed 100 billion US dollars in trade with China. According to the data of the General Administration of Customs of China, in 2022, the total import and export volume between China and Brazil reached 171.345 billion US dollars, and China imported 54.40 million tons of soybeans and 1.105 million tons of frozen beef from Brazil, accounting for 59.72% and 41% of their total imports.

Wang Chengan, chief expert of the China Portuguese-speaking Countries Research Center at the University of International Business and Economics, said that the economies of China and Brazil are highly complementary, and the demand for Brazilian bulk products in the Chinese market is expanding.

Zhou Zhiwei, deputy director of the International Relations Office of the Latin America Institute of the Chinese Academy of Social Sciences and executive director of the Brazilian Studies Center, believes that the trade structure of agricultural products, minerals and oil "three legs support" will enable the economic and trade cooperation between the two countries to be stable and far-reaching.

Image source: Visual China

In February this year, the People's Bank of China and the Central Bank of Brazil signed a memorandum of cooperation to establish a RMB clearing arrangement in Brazil. Zhou Zhiwei said that the signing of this memorandum of cooperation is expected to improve the efficiency of bilateral trade, offset external risks, and add a more effective guarantee mechanism to the economic and trade cooperation between the two countries.

While bilateral trade between China and Brazil has developed steadily, investment cooperation has also become increasingly active. China has long been an important source of direct investment in Brazil.

China and Brazil are each other's important economic and trade partners. In recent years, trade between the two countries has developed steadily, and investment cooperation has become increasingly active. Experts believe that "diversification" will become a new trend in China-Brazil economic and trade cooperation.

RMB settlement "Moments" continue to expand

It is reported that China has similar agreements with Russia, Pakistan, and other countries.

According to the Reference News Network on January 21, citing the website of Russia Today TV on January 18, the Russian Foreign Minister said on January 18 that about half of the trade volume between Russia and China is settled in the local currencies of the two countries, and this proportion is rising rapidly. According to the report, in recent years, Russia and its trading partners, including India and China, have made efforts to settle transactions in local currencies, hoping to wean themselves off dependence on the dollar and the euro.

According to a report by Xinhua Finance on March 23, Russian President Vladimir Putin said in April last year that Russia was ready to significantly increase the proportion of local currency settlements in the foreign trade systemforeign exchange marketBe prepared so that any foreign currency can be freely and fully converted into rubles. Sergei Hestanov, a macroeconomic expert at the Russian company "Open Investment", said that the development of RMB instruments will be the top priority of Russia's foreign exchange market. RMB trade settlement is widely used and occupies an important position in the international monetary system. In terms of mutual trade, Russia's most important and most promising partner is China, and the RMB is a very good choice for Russia's international trade settlement.

According to Xinhua News Agency on March 23, Russia's Kommersant newspaper quoted the latest data from the Moscow Exchange as saying that in February this year, the RMB surpassed the US dollar for the first time and became the largest currency in the exchange's monthly trading volume. In 2022, foreign currencies such as the US dollar and the euro declined in Russia, while the RMB is becoming one of the most popular foreign currencies in Russia.

Image source: Xinhua News Agency

According to CCTV News on February 24, the Central Bank of Iraq recently announced the latest measures to improve its foreign exchange reserves, including allowing direct settlement of the country's trade with China in RMB.

The Central Bank of Iraq issued a statement on February 22 saying that direct settlement of trade with China in RMB will be achieved in two ways: one is to increase the RMB reserves through the RMB accounts opened by the country's banks in Chinese banks; the other is to increase the country's banks' dollar reserves through the accounts of the Iraqi Central Bank in JPMorgan Chase and Singapore DBS Bank for RMB exchange.

Mudhir Saleh, an economic adviser to the Iraqi government, told the media that this will be the first time Iraq has allowed the settlement of imports from China in RMB, after the country's trade with China has been settled in US dollars.

Internal and external factors jointly promote the internationalization of the RMB

According to Xinhua News Agency on March 23, when talking about the reasons for the significant increase in the proportion of RMB assets in the Russian Federation's National Wealth Fund, Russian Finance Minister Anton Siluanov said: "Among the currencies of friendly countries, the RMB has the characteristics of a reserve currency, and there is enough liquidity in our domestic foreign exchange market."

Analysts believe that the popularity of the RMB in Russia is due to Russia's own policy adjustments and the continuous development of Sino-Russian economic and trade cooperation. More importantly, China's sustained and stable economic growth in recent years has laid a solid foundation for the internationalization of the RMB.

Over the past decade, China has been an important engine of global economic growth. Against the backdrop of the COVID-19 pandemic and the severe external environment, China's economy has withstood pressure and achieved faster growth than most developed countries. Mikhail Parshkov, a certified investor at the Bank of Russia, believes that China has huge economic potential and a world-leading level of economic development. These macroeconomic achievements endow the RMB with greater investment potential.

Furthermore, the RMB exchange rate is stable, and its safe-haven nature as an international currency has become increasingly prominent. Since 2022, due to factors such as the Federal Reserve's monetary policy tightening and the ongoing conflict between Russia and Ukraine, the exchange rate of the euro, the yen and other currencies against the US dollar has fallen sharply, while the RMB has performed relatively well, making it more attractive to Russian investors. Russian financial analyst Vladimir Sagaraev said that the RMB has important international influence, and compared with many national currencies, the risk of the RMB being exposed to external economic pressure is much smaller.