Argentina has reached an agreement with China to start using the yuan instead of the US dollar to pay for Chinese imports. This move is aimed at relieving Argentina’s dwindling dollar reserves, according to reports.
The deal is worth about $1.04 billion, and it further boosts China’s standing on the world stage, while diminishing the US’s role on various fronts under President Joe Biden.
The agreement was reached with various companies, and it will allow Argentina to accelerate its trade with China, as Beijing seeks to gain a further foothold in South America.
The decision comes as Argentina battles critical levels in its dollar reserves due to a sharp drop in agricultural exports caused by a historic drought and political uncertainty ahead of elections this year.
In November last year, Argentina expanded a currency swap with China by $5 billion in an effort to increase its yuan reserves. That agreement allowed Argentina to advance the rate of imports with yuan-denominated import orders being authorized in 90 days rather than the standard 180 days.
Argentina has been working hard to build a relationship with Beijing after having officially joined China’s infrastructure-building Belt and Road Initiative (BRI) last year.
Argentina’s government finalized a deal with Beijing soon after to construct a nuclear plant based on Chinese technology near Buenos Aires, Argentina’s national capital, in the near future. The Chinese Communist Party will reportedly provide $8 billion in financing toward the project’s $12 billion total budget.
As Breitbart News reported, Argentina currently owes the International Monetary Fund (IMF) $44 billion. The international organization is in talks with Argentine authorities to finalize a fourth review of its program that includes a flexibilization of the proposed foreign exchange reserve accumulation. Argentina’s foreign reserves are now at a $5 billion deficit, and it cannot comply with the current goals.
The decision to use the yuan instead of the US dollar for Chinese imports is a strategic move by Argentina to diversify its foreign exchange reserves and reduce its reliance on the US dollar. It also highlights China’s increasing economic influence in the region, as the country seeks to expand its global economic reach through initiatives such as the BRI.
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