On Wednesday, the Brazilian government announced that China and Brazil have agreed to trade using their own currencies, bypassing the need for the US dollar as an intermediary. This move by Beijing is represents another challenge to Biden and the US dollar, as China seeks to rival the US economically.
“The expectation is that this will reduce costs… promote even greater bilateral trade and facilitate investment,” the Brazilian Trade and Investment Promotion Agency (ApexBrasil) said.
China is Brazil’s biggest trading partner, with a record US$150.5 billion (S$200 billion) in bilateral trade last year.
The deal, which follows a preliminary agreement in January, 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 has similar currency deals with Russia, Pakistan and several other countries.
This move by China could further erode the dollar’s status and lead to greater use of alternative currencies for international trade. China’s currency deals with Russia, Pakistan, and other countries show its intention to create a more multipolar world economy that is less reliant on the US dollar.
The news is in line with China’s broader strategy to expand its global influence and challenge the US-led international order. The deal could have far-reaching consequences for the US economy and international relations as well.
The deal could also lead to a decrease in demand for US Treasury bonds and a rise in borrowing costs for the US government. This could make it more difficult for the US to fund its budget deficits and maintain its current levels of government spending.