Argentina’s economic crisis and South American nation’s continued reliance on the US dollar has resulted into an opportunity for Chinese Yuan that Bejing didn’t see coming. Many leading companies are now embracing the Chinese Yuan, a currency that has not played much significant role in global trade so far. 

According to Argentina’s customs agency tally cited by Bloomberg, more than 500 Argentine companies have requested to pay for imports in yuan.

The import payments in the Chinese currency equivalent to $2.9 billion have reportedly been authorised.

In first 10 days of June, yuan transactions in Argentina’s currency market have doubled when compared to all of May, to about $285 million. 

At the same time, the share of yuan transactions in Argentina’s foreign currency market recently hit a daily record of 28 per cent, compared with just 5 per cent in May, according to data from Mercado Abierto Electrónico exchanges cited by Bloomberg. 

Argentina’s embrace of Chinese Yuan: What does it mean?

The trend reportedly highlights both Argentina’s economic crisis as well as China’s ambitions for the yuan. 

“The central bank doesn’t have dollars, so it needs the emergency aid China is offering,” Marcelo Elizondo, a trade economist in Buenos Aires, was quoted as saying by Bloomberg. 

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“For Argentina, its currency ties to China represents an emergency, but for China its a point of leverage to take advantage of a geopolitical opportunity,” Elizondo added.

US dollar’s receding dominance: What is happening?

The ongoing war in Ukraine and corresponding western economic sanctions on Russia have pressed many nations to opt for non-dollar trade routes, stoking a pattern of assertive financial independence among the nations of Global South. 

Earlier, Brazil’s President Luiz Inácio Lula da Silva had made an impassioned call to his BRICS counterparts Russia, India, China and South Africa to replace the US dollar with their own currencies for trading among the BRICS member nations. 

Lula’s comments came amid efforts by India, China and Russia to set up streams for trade in their own currencies and expanding calls amongst BRICS nations to launch a potential common currency mechanism for trade. 

“Every night I ask myself why all countries have to base their trade on the dollar,” Lula had said at the New Development Bank in Shanghai, also called the BRICS bank. 

“Who decided that our currencies were weak, that they didn’t have value in other countries?,” Lula asked. 

China’s Yuan outreach to Argentina

China recently allowed Argentina to use more than half of a $18 billion currency swap line for bilateral trade. 

The two nations have shared a bilateral swap agreement since 2009.