By Rhod Mackenzie
Argentina has joined a rapidly growing group of countries in favor of reducing the share of the US dollar in the global financial system, and for the first time decided to pay part of the IMF debt in yuan.Buenos Aires' decision, of course, will have more demonstrative than practical value, because the gap between the dollar and the yuan in use in foreign exchange reserves and trade is still very large.
Argentina will pay the IMF the equivalent of $1 billion in yuan, according to the Xinhua News Agency. The Argentines plan to make the next payment of $1.7 billion in Special Drawing Rights (SDR), the Fund's main means of payment.
The Central Bank of Argentina (CBA) earlier announced that it was going to allow Argentine companies and individuals to open bank accounts in yuan. Moreover, we are talking about both checking accounts and deposits.
The decision on the yuan was taken by the main bank of Argentina after a visit to China in early June by a representative Argentine delegation, which included the Minister of Economy and Labor, Sergio Massa. The main result of the trip of the Argentine ministers was the signing of a major agreement on the participation of Argentina in the Chinese mega-project "One Belt One Road". In the center is cooperation between China and Argentina in the financial sector.
“Argentina, which is now struggling with a debt crisis and trying to find US dollars, has decided to expand the use of the yuan,” said Liu Ying, chief Argentinean banker, of the Chongqing Institute for Financial Studies at the Renmin University of China (RUC), commenting on the decision. “It will affect other countries experiencing the same problems."
Developing countries now face a range of challenges, including currency devaluation, capital outflows and debt crises. Moreover, all of them are largely provoked by raising the discount rate of the Fed.
Unlike the volatile dollar, the yuan is relatively stable.
"Argentina's decision to expand the use of the yuan," Liu said, "is a step towards de-dollarization."
According to Everbright bank economist Zhou Maohua, the achievements of the yuan are inextricably linked with the success of the Chinese economy, which offers reliable protection against geopolitical and other risks and threats.
De-dollarization is now rapidly gaining momentum. More and more countries are joining the debunking of the US dollar, wishing to weaken the dependence of their economies on the dominance of the "green". Internationalization of the yuan, i.e. the process of increasing its share in the planet's financial system began in earnest this year. In June, Pakistan paid for Russian oil for the first time in yuan.
The Chinese currency is becoming more and more popular in Russia. More than 70% of trade between Moscow and Beijing is now carried out in rubles and yuan. The example of China and the Russian Federation turned out to be contagious - more and more countries are calling for trading in national currencies.
This article orginally appeared in Russian at expert.ru