Advancing global de-dollarization, China’s central bank is boosting its gold reserves while signing currency swap deals in yuan with countries like Argentina, encouraging the use of renminbi instead of US dollars.
by Ben Norton
Part 4 - China uses currency swap lines to help debt-burdened countries, while advancing de-dollarization
China began conducted currency swaps with Argentina back in 2009, under left-wing President Cristina Fernández de Kirchner. Deals have been repeatedly renewed since then.
But the South American nation is not the only country that has worked out a system like this with the East Asian giant.
In December, the Wall Street Journal reported that Beijing’s central bank is using an “unusual channel”: “currency-swap lines to support governments that borrowed heavily from Chinese banks”.
The People’s Bank of China (PBOC) has given hundreds of billions of dollars worth of yuan to dozens of countries in exchange for their domestic currencies, the newspaper reported.
Among these recipients are Pakistan, Sri Lanka, Argentina, and Laos — all nations that struggle with external debt, much of it denominated in US dollars.
But the South American nation is not the only country that has worked out a system like this with the East Asian giant.
In December, the Wall Street Journal reported that Beijing’s central bank is using an “unusual channel”: “currency-swap lines to support governments that borrowed heavily from Chinese banks”.
The People’s Bank of China (PBOC) has given hundreds of billions of dollars worth of yuan to dozens of countries in exchange for their domestic currencies, the newspaper reported.
Among these recipients are Pakistan, Sri Lanka, Argentina, and Laos — all nations that struggle with external debt, much of it denominated in US dollars.
The Wall Street Journal explained, “By replenishing other countries’ reserves, the PBOC may be helping some of the world’s most indebted countries avoid rising borrowing costs”.
While the newspaper portrayed this as a cynical effort by China to “prop up” members of its Belt and Road Initiative, the media outlet acknowledged that Beijing is also using the currency swaps to accelerate the de-dollarization of the international financial system.
“The PBOC says the swap lines are there to help grease the wheels of international trade, ensure financial stability and further the adoption of the yuan in a world where trade and finance are dominated by the U.S. dollar”, the Wall Street Journal wrote.
It added: “The PBOC’s swap network is the largest of its kind, according to the World Bank. The PBOC said in a 2021 report that it has swap facilities with 40 countries with a combined capacity of almost 4 trillion yuan, or about $570 billion”.
While the newspaper portrayed this as a cynical effort by China to “prop up” members of its Belt and Road Initiative, the media outlet acknowledged that Beijing is also using the currency swaps to accelerate the de-dollarization of the international financial system.
“The PBOC says the swap lines are there to help grease the wheels of international trade, ensure financial stability and further the adoption of the yuan in a world where trade and finance are dominated by the U.S. dollar”, the Wall Street Journal wrote.
It added: “The PBOC’s swap network is the largest of its kind, according to the World Bank. The PBOC said in a 2021 report that it has swap facilities with 40 countries with a combined capacity of almost 4 trillion yuan, or about $570 billion”.
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