The growing confrontation between China and the West is driving a fight for dollarization and de-dollarization in our countries, especially in countries like Argentina that are turning their back on the US dollar and adopting the Chinese yuan instead.
What consequences could all this have on the global economy and in our region, first it was Brazil and now Argentina joins the growing list of Latin American countries that are challenging the dominance of the US dollar in international trade, by adopting the Chinese yuan as their currency For their transactions with China, these countries are sending a very clear message: they are willing to diversify their trade relations and reduce their dependence on the dollar.
Last week Argentina announced that it will use the yuan for trade with China starting this month, they are importing a billion dollars worth of goods in April and the payment will be made in the Chinese currency (we continue with the agenda), but why? Argentina is making the decision to exchange the yuan for trade with China.
There are several arguments in this decision, some of which are related to the global economy and others to the internal economic situation of Argentina, to fully understand the reasons we must first examine the economic situation of Argentina and how its trade relations with China could look. affected by this change.
First, let's remember that Argentina has faced economic problems in recent years such as high inflation, very slow economic growth and skyrocketing external debt, these problems have led to a decrease in confidence in the Argentine currency, the peso which has resulted in a higher demand for US dollars and other strong currencies in the country.
China is one of the main trading partners of this country and a very important source of foreign direct investment in the country, also by using the yuan for trade with China Argentina can save US dollars that are very scarce and valuable for the local economy, in addition this change may also help Argentina reduce its dependence on the US dollar in its international trade.
The dependence on the US dollar in international trade has been a source of concern for many countries and is that it can lead to greater vulnerability to fluctuations in the value of the dollar and economic policy decisions of the United States, when changing the yuan Argentina it is diversifying its trade relationships and reducing its dependence on a single currency, which could help protect its economy from fluctuations in the value of the dollar.
The South American country faced a devastating drought this year, resulting in a decline in agricultural exports and therefore in the inflow of dollars into the country, by using the yuan for trade with China Argentina can preserve its dollar reserves And that's especially important in times of economic hardship.
By using the yuan instead of the US dollar Argentina can reduce the costs associated with currency conversion and international transactions and that can result in very large savings for local businesses, then there is exchange rate stability, by changing the yuan Argentina can reduce their exposure to fluctuations in the value of the US dollar and that may help them stabilize their trade and financial exchanges with China; then we have the increase in Chinese investment by facilitating the use of the Joan in bilateral trade today Argentina could attract more Chinese investment in the country and that can boost economic growth and job creation.
Also access to new markets and business opportunities, by adopting the yuan as a currency of exchange, Argentina may have the opportunity to access new markets and business opportunities in the Asia Pacific region, which can further boost trade and investment in the country.
In the short term, the transition to the Joan is likely to have a very small impact on the Argentine economy, since the volume of trade with China represents only a part of the country's total trade, however, in the long term the adoption of the Yuan It could have more significant effects especially if more countries decide to follow Argentina's lead and switch to the yuan in their trade relations with China.
Last year in 2022, the international use of the Yuan increased by 26% and more than 6 trillion dollars in Chinese currency payments were settled, the yuan has therefore become the fifth largest currency in the world for global payments , after the dollar, the British pound, the euro and the Japanese yen, it is also the fifth most held currency in international foreign exchange reserves, around 80 central banks hold the yuan in reserve and more banks are joining the list .
85% of the world's central banks either already hold the yuan or are interested in building a yuan reserve, so it is clear that the Chinese currency is emerging as a challenge to the US dollar, today a new report supports this trend and the The dollar suffered another setback in March when the yuan became the most widely used currency for cross-border transactions in China and set a record. Nearly $550 billion in yuan was exchanged used in almost 49% of all transactions made with China.
For now, the dollar remains king, used in more than 45% of all global transactions.
It only makes sense to be alarmed by the de-dollarisation that some countries are implementing, if US interventionist policies continue. But if that were to change (at least, publicly) or, if the interest rate were to remain stable for decades, imagine... Everything would change. I would be more cautious (not an attack on you, I respect you) but in general terms.
Greetings,
It is the game of the sides, the same happens with the coins.
Worry more about the interventionism of the globalist elites, who dominate countries like the USA and who are already entering our homes and even worse in our bodies!
Precisely right, my good friend! Amazing job here, man.
Yay! 🤗
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