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China Turns to BRICS to Globalize Yuan

Thursday, March 15, 2012

For more than three years, China has been gradually implementing a strategic plan to internationalize its currency, the yuan, with a central element of this strategy being to increase the yuan’s role in China’s cross-border trade settlement. To date, these efforts have been strikingly effective, as the “people’s currency” was used to settle nearly 10 percent of China’s international trade in 2011, up from essentially zero in 2009.

Last week, it was reported that China is poised to take another significant step in promoting the yuan’s use in global trade settlement by extending yuan-denominated loans to the other BRICS nations: Brazil, Russia, India and South Africa. The details on the arrangement are still fuzzy, but from what we do know, the money is slated to come from the China Development Bank (CDB), which will reportedly sign an official agreement on the matter when the BRICS meet in New Delhi at the end of this month. Additionally, the remaining BRICS nations are said to be preparing similar loans via their own development banks, which will be offered in their national currencies to the other members, though these agreements are fundamentally about access to yuan financing. ...

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