China is trying to make the yuan (their currency) a good alternative to the U.S. dollar when trading with other countries. To help with this, China agreed with Brazil to pay for trades with their own money instead of dollars and recently bought Liquefied Natural Gas from France using yuan too.
China’s money, the yuan, is becoming a more popular option than the American dollar to do business with other countries. Recently, China made two big moves to help this happen- it had its first agreement with Brazil that let them pay each other in their own currencies and also completed a trade using yuan for Liquefied Natural Gas (LNG).
The China-Brazil deal lets them buy and sell stuff with each other using their very own currencies (the Chinese yuan and the Brazilian real). This helps make transactions between both countries more affordable and quicker and encourages them to do even more trading. The Brazil Trade and Investment Promotion Agency said that it also encourages investment from each other.
In 2022, the total amount of money involved in trade between the two countries had reached $150 billion, making China Brazil’s biggest partner.
The China National Offshore Oil Corporation (CNOOC) and France’s Totalenergie made a big purchase of 65,000 tonnes of LNG. This is a type of oil from Arabia, and the transaction happened on the Shanghai Petroleum and Natural Gas Exchange. CNOOC is committed to unique pricing and settlements, according to Yu Jin who is their deputy general manager.
“Using the Chinese currency, called the yuan, to buy resources from other countries can help us make international energy trading much easier and create a variety of different options for buying and selling.”
A ‘Strong Wall’ to Protect
Recently, the Chinese government has taken big steps to try and get more people using the yuan instead of the dollar. For example, Russia is planning to use the yuan when settling payments with a range of different countries. However, experts think that in order for this to really work, they need to set up some new rules first.
Professor Ju Jiandong, someone who knows a lot about trade between the USA and China, suggested a type of tax (like an extra fee) on money that moves from one country to another. This would act as protection for the country against any possible danger from outside sources. It’s like putting up a strong wall so that people could safely convert their own currency into different currencies.
Even thought the Chinese yuan is not used for many payments around the world, it just makes up 2.19% of all global payments, this could change if China introduces a digital currency. Jiandong said that if digital currency is introduced, it might give the Chinese yuan an advantage and make it more popular overseas.
Do you have an opinion on how the Chinese yuan is being used more and more around the world?