China and Brazil have agreed to conduct their trade in their own currencies, moving away from the US dollar, AFP reports. The agreement establishes a clearing house in Brazil with the Industrial and Commercial Bank of China (ICBC) chosen to facilitate the exchange of yuan for Brazilian currency.
China has previously signed agreements with Saudi Arabia and Russia to allow the use of the yuan in trade, and has several “clearing houses” outside mainland China, including in Chile and Argentina.
Experts say the deal could reduce costs, promote bilateral trade and facilitate investment. While direct transactions will reduce financial costs, and exchange rates for the yuan vary less, Brazil is unlikely to eliminate the need for dollars entirely when trading with China, as more than 90% of current foreign trade transactions in Brazil are still conducted and priced in dollars.