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China and Brazil in Currency Swap Deal

in International Business

China and Brazil in Currency Swap Deal

China and Brazil have agreed a currency swap deal to allow their respective central banks to exchange local currencies up to USD 30bn.

The amount would serve as a safeguard reserve in times of crisis and towards strengthening bilateral ties.

“As international credit remains scarce, we will have enough credit for our transactions,” Brazil’s Finance Minister, Guido Mantega, said.

China is expanding its global role for the yuan, as it has been tring to push for trade to be settled in yuan, rather than in US dollars.

In March this year, it signed a swap deal with Australia worth up to A$30bn ($31bn; £20bn) to promote bi-lateral trade and investment.

It has also inked currency pacts with Hong Kong and Japan.

Though China and Brazil have remained trade partners, their relations have been recently rusted a bit, as they have begun allegations against each other.

Brazil has grown concerns about the increased imports of low-cost goods from China, saying that it would hurt the local manufacturing industry.

China accuses Brazil of raising import taxes on Chinese goods.

They said they will work closely in mining, industrial, aviation and infrastructure development.

The agreement also comes at a time when growth in China, the world’s second largest economy, has been slowing.

China’s economy grew at an annual rate of 8.1% in the first quarter, the slowest pace in almost three years. There are concerns that growth may slow further in the coming months.

However, Brazil’s Finance Minister, Mr Mantega said “China will keep being the place where to do business”.

Tags assigned to this article:
BrazilChinaChina trade with BrazilYuan

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