US-China Relations Updates

1. Elon Musk’s statement suggests that if a country repeatedly uses its currency as a tool for political or economic leverage, other countries may eventually become wary and stop using it. This could potentially lead to a shift towards other currencies that are perceived as more stable or reliable.
2. The Bloomberg report highlights the increasing popularity of the Renminbi in China’s cross-border transactions, with the currency surpassing the US dollar as the most commonly used currency for such transactions. This is a significant milestone, as it reflects China’s growing economic influence and the increasing acceptance of the Renminbi as a global currency. The report also notes the rapid growth of the Renminbi’s share of cross-border payments since 2010, when it accounted for zero percent of such payments.
3. Argentina‘s announcement that it will stop using the US dollar to pay for imports from China and instead use the Renminbi for settlement reflects a growing trend of countries diversifying away from the US dollar. The move also reflects Argentina’s efforts to strengthen its economic ties with China, which is now its largest trading partner. The fact that Argentina is willing to use the Renminbi for settlement suggests a growing confidence in the currency’s stability and reliability.
4. Brazilian President Lula’s questioning of the use of the US dollar for trade with China reflects a broader sentiment among some countries that the dominance of the US dollar in global trade is unjustified and unsustainable. The memorandum of cooperation signed by Brazil and China to arrange for the use of the Renminbi for cross-border transactions is another example of countries seeking to diversify away from the US dollar and towards alternative currencies. This trend could potentially weaken the US dollar’s position as the dominant global currency and have significant implications for the global economy.
5. In addition to the above points, it is worth noting that China’s efforts to promote the use of the RMB are not limited to cross-border payments and trade with Latin American countries. The Export-Import Bank of China (China Eximbank), a major trade policy trade bank, announced on March 14 that it had made its first loan cooperation with the Saudi National Bank, the largest bank in Saudi Arabia, in RMB Yuan. This move is aimed at facilitating financial cooperation under the framework of the China-proposed Belt and Road Initiative (BRI), which seeks to promote economic and infrastructure development in countries along the historic Silk Road trade routes. The use of the Renminbi in this context reflects China’s ambition to increase the internationalization of its currency and promote its use as a global reserve currency.
6. Malaysia is another country that has shown interest in using the RMB for its trade and investment activities. In 2021, the Central Bank of Malaysia Central Bank of Malaysia announced that it would allow local banks to conduct Renminbi transactions and offer Renminbi-denominated products to their clients. This move is aimed at promoting the use of the Renminbi in Malaysia-China trade and investment, which has been growing rapidly in recent years. Malaysia is also a participant in the BRI and has received significant investment from China in infrastructure projects such as the East Coast Rail Link. The use of the Renminbi in these projects could further strengthen the economic ties between the two countries and promote the internationalization of the Renminbi.
7. Iran is another country that has been exploring the use of the RMB as an alternative to the US dollar in its trade with China. In 2020, the two countries signed a 25-year strategic cooperation agreement, which includes provisions for increasing bilateral trade and investment and using the Renminbi and Iranian rials for transactions. This move is aimed at bypassing US sanctions on Iran, which have limited its ability to use the US dollar and conduct international transactions. In addition, China has been Iran’s largest trading partner for several years and has continued to import oil from Iran despite US sanctions. The increasing use of the Renminbi in Iran-China trade could further strengthen the economic ties between the two countries and have significant implications for the global economy and the role of the US dollar as the dominant global currency.

Apart from the countries mentioned earlier, several other countries are exploring the use of the Renminbi in their trade with China.

For example, Russia and China have been discussing the use of the Renminbi and the Russian Ruble in their trade and investment activities. The two countries have increased their economic cooperation in recent years, and the use of the Renminbi in their transactions could further strengthen their ties.

Similarly, Turkey has been trying to increase the use of the Renminbi in its trade with China, with the two countries signing a currency swap agreement in 2019. This move is aimed at promoting the use of the Renminbi in their bilateral trade and reducing their reliance on the US dollar.

Pakistan is another country that has been exploring the use of the Renminbi in its trade with China. The two countries have signed several agreements to increase their economic cooperation, and Pakistan has been looking to diversify its foreign exchange reserves away from the US dollar.

Other countries that have shown interest in using the Renminbi in their trade with China include South Africa, Indonesia, and the United Arab Emirates. The increasing use of the Renminbi in these countries reflects China’s growing economic influence and the increasing acceptance of the Renminbi as a global currency.

1. South Africa: As a member of the BRICS group of nations, South Africa has been working to increase its economic cooperation with China. The two countries have signed several agreements to promote trade and investment, and South Africa has been exploring the use of the Renminbi in its trade with China.
2. Indonesia: Indonesia is another country that has been looking to increase its economic ties with China. In 2020, the two countries signed a trade and investment agreement, and Indonesia has been exploring the use of the Renminbi in its bilateral trade.
3. United Arab Emirates (UAE): The UAE has been working to increase its economic cooperation with China, with the two countries signing several agreements in recent years. In 2015, the UAE became the first country in the Middle East to establish a Renminbi clearing center, which allows for the use of the Renminbi in its trade with China.
4. Thailand: Thailand has been exploring the use of the Renminbi in its trade with China, with the two countries signing a currency swap agreement in 2014. This move is aimed at promoting the use of the Renminbi in their bilateral trade and reducing their reliance on the US dollar. The Bank of Thailand has decided to further discuss the expansion of the Renminbi settlement business with the People’s Bank of China in May to avoid US dollar risks.
5. Australia: Australia has also been exploring the use of the Renminbi in its trade with China. On July 15th, 2022, according to a statement from BHP Group, the Victoria cargo ship loaded with iron ore from Port Hedland, Western Australia, set sail two weeks ago and arrived at the major iron ore trading port of Rizhao in China. What is unusual about this transaction is that both sides settled the trade using the Renminbi, which is the first precedent in over a century of iron ore trade history between China and Australia. The report mentioned that two years ago, China and Australia had discussed the possibility of using the Renminbi for future iron ore trade and had signed an agreement, with BHP Group also involved. However, prior to this transaction, attempts to settle trades in Renminbi had never been successful between the two sides.

Overall, the increasing use of the Renminbi in these countries reflects China’s growing economic influence and the increasing acceptance of the Renminbi as a global currency. As more countries explore the use of the Renminbi in their trade and investment activities with China, it could potentially weaken the position of the US dollar as the dominant global currency and have significant implications for the global economy.

In addition, French companies have been increasingly using the Renminbi for their business transactions with China. For example, in 2020, Frenzh energy company Total SA  conducted its first transaction in Renminbi for the purchase of crude oil from China. This reflects a growing trend of European companies diversifying away from the US dollar and using alternative currencies such as the Renminbi for their transactions with China.

We will keep monitoring the currency situation.