The 5 countries that are leaving the American currency for the Chinese

By | May 9, 2023

The US dollar has dominated the markets as an international reserve currency since World War II, playing a very important role in world trade.

After the war in Ukraine and the sanctions imposed on Russia for the invasion, some world leaders and businessmen began to propose alternative currencies for trade, warning of the power that Washington wields. Among those who rang the bell was even French President and close US ally Emmanuel Macron, who warned of the “extrateritoriality of the dollar”, arguing that Europe should reduce its reliance on the US currency.

Within this environment, the Chinese yuan began to seize the opportunity, seriously threatening the dominance of the dollar. So while the dollar maintains its dominance, the yuan’s use in contracts trading everything from oil to nickel is accelerating.

In this context, for the first time in March, the use of the yuan exceeded the use of the dollar in cross-border transactions in China, according to a Bloomberg Intelligence survey on April 26.

In the US they don’t turn a blind eye. US Treasury Secretary Janet Yellen told CNN in April: “When we use economic sanctions tied to the role of the dollar, there is a risk that, over time, its hegemony will be undermined.”

“It is a very effective tool. Of course, it creates a desire on the part of China, Russia and Iran to find an alternative,” he added, noting, however, that it is not easy to replicate the ecosystem, such as international payments infrastructure, which supports the US dollar.

The five countries that turned to the yuan for trade and other transactions, either to circumvent sanctions or as an alternative to the dollar, as summarized by Business Insider, are:


First in line for the yuan is Russia, which is, after all, the country the West has imposed sweeping sanctions on for its war with Ukraine.

Russia’s economy has been severely “damaged” by sanctions, and some Russian banks have been banned from the Swift banking communications network, which allows banks around the world to communicate about cross-border transactions.

Furthermore, at least half of its $640 billion in foreign exchange reserves have been “frozen” due to trade restrictions. All this forced Russia to look for alternative currencies for use in international transactions.

The Chinese yuan is the main alternative and one of the few major currencies available to Russia after Western sanctions cut it off from the global dollar-denominated financial system.

The Russians bought 41.9 billion rubles (or $538 million) in Chinese yuan in March, more than triple the 11.6 billion rubles in February, according to Russia’s central bank. Likewise, in the Russian foreign exchange markets, ruble-yuan transactions represent 39% of the total volume, surpassing the corresponding figure between ruble-dollar, which is 34%.


The president of Brazil, Luiz Inácio Lula da Silva, has been one of the most fervent supporters of the creation of alternative trade settlement currencies, going so far as to call on the BRICS countries (Brazil, Russia, India, China and South Africa) to withdraw from the dollar .

Brazil’s central bank has already bought Chinese currency. The yuan overtook the euro to become the second most dominant currency in Brazil’s foreign reserves, after the dollar, by the end of 2022, according to the country’s central bank.

In March, Brazilian bank Banco BOCOM BBM, owned by major Chinese bank BOCOM, reached an agreement with China to allow direct trade in Brazilian reais and yuan instead of using the dollar as the default currency, according to the Trade Promotion Agency. and Investments from China. Brazil.

At the same time, Lula called on the BRICS countries to create a common currency for transactions. “Why can’t we do business in our own currencies?” he asked during an official visit to China in April, according to the Financial Times.

It is also worth noting that Brazil’s largest pulp and paper producer, Suzano, is considering selling its products in China with a yuan-denominated price. China’s currency is “inflating” and smaller clients are demanding yuan-linked deals, Suzano chief executive Walter Schalka said in an interview with Bloomberg. It should be noted that China is the largest buyer of basic products and represents 43% of Suzano’s pulp market.

“China will have a bigger presence in the world market, I have no doubt,” Schalka said. “My own perception is that it would be much better to have long-term cooperation between the West and the East, but what we are seeing is an increase in tension at the moment.”


Bangladesh agreed in April to pay Russia $318 million to build a nuclear power plant, using Chinese yuan.

The two countries were at an impasse for a year before settling on the yuan because Bangladesh could not pay Russia in dollars.

Rosatom, the state nuclear power company building the Bangladesh plant, had initially requested rubles for payment, according to a Bloomberg report on April 18 that cited two officials with knowledge of the matter.

However, the two countries eventually agreed to do the yuan deal because China had authorized some unnamed Bangladeshi banks to do yuan deals with China, the Washington Post reported on April 17, citing a Rosatom spokeswoman.

Commenting at the time, the executive director of the Institute for Policy Research in Bangladesh, Ahsan Mansur, said his country needed to act in its national interest and make a realistic decision on its energy security. “The interests of Third World countries like Bangladesh are not the same as those of China and the United States,” he told the Washington Post. “We must maintain relations with both.”


Argentina said on April 26 that it will start paying in yuan, instead of dollars, for imports from China.

The move was mainly motivated by Argentina’s desire to cut dollars from its foreign exchange reserves.

Declining dollar reserves, which have been falling due to political uncertainty and declining agricultural exports after a historic drought, are weighing on the Argentine peso. This pressure, in turn, fuels inflation.

The yuan payment program was expected to start in April with the country’s goal of paying for $1 billion in imports using the Chinese currency. After that, it plans to pay for monthly imports worth about $790 million in Chinese currency.

“These types of measures give our reserves more strength and are key to improving the outlook for net reserves, giving us greater freedom and ability to intervene against those who are speculating and exaggerating the financial situation,” he said in a publication of the finances of the country. minister, Sergio Massa.

Yuan-based import orders could soon receive approval within 90 days instead of the usual 180 days, which means faster processing, he added.


Iran, which has also been heavily sanctioned, discussed the use of the yuan as early as 2010. Then, in 2012, China began buying crude oil from Iran using the Chinese currency.

International sanctions against Iran were lifted in 2016, following an agreement to limit its nuclear program, but the calm did not last long. In 2018, the US reimposed sanctions on Iran following then-President Donald Trump’s unilateral decision to withdraw the US from the international agreement to curb Tehran’s nuclear program.

Like Russia, Iranian banks have been blocked from Swift since 2018, prompting Tehran to seek an alternative payment system.

In February 2023, Tehran and Beijing discussed increasing the use of the yuan and the Iranian rial in bilateral trade.

Meanwhile, Tehran also linked in February to Russia’s Financial Message Transfer System (SPFS) payment system, which is equivalent to the Swift system, according to Al Jazeera. “The economic channel between Iran and the world is being restored,” Mohammadreza Farzin, governor of Iran’s central bank, was quoted as saying by the news agency.

Read more:

On the way to the “de-dollarization” of the world economy

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