China and Brazil have agreed to a new trade deal that will allow them to trade in their own currencies, ditching the US dollar as an intermediary for bilateral trade.
The deal was announced by the Brazilian government on Wednesday, and will allow the two countries to conduct their massive trade and financial transactions directly, exchanging Chinese Yuan for Brazilian Real and vice versa. This move is the latest in a series of actions by China against the US dollar, as the country seeks to establish itself as the top rival to US economic hegemony.
For Brazil, the deal represents a significant shift away from the traditional reliance on the dollar as the world’s primary currency. The deal is expected to reduce costs and promote even greater bilateral trade, according to the Brazilian Trade and Investment Promotion Agency, ApexBrasil. The country’s biggest trading partner is China, with a record USD 150.5 billion in bilateral trade last year.
The new currency deal follows a preliminary agreement reached by the two countries in January, and was announced after a high-level China-Brazil business forum in Beijing.
Brazilian President Luiz Inacio Lula da Silva was originally scheduled to attend the forum as part of a high-profile China visit, but had to postpone his trip indefinitely on Sunday after he came down with pneumonia.
The Industrial and Commercial Bank of China and Bank of Communications BBM will execute the transactions, officials said. China already has similar currency deals with Russia, Pakistan, and several other countries.
The move away from the US dollar as an intermediary in international trade could have significant implications for the global economy. It could lead to other countries following suit and conducting their trade and financial transactions in their own currencies, potentially undermining the dollar’s position as the world’s primary currency.
