China and Argentina Agree to Trade Using Own Currencies

[World Traveler]

China strikes again, after similar deals with South Korea, Indonesia, and Malaysia. The obvious purpose: to avoid the need for dollars, which they've used up till now in their bilateral trade.

"CHINA and Argentina have agreed to swap $14.5 billion of their currencies to enable South America's second-largest economy to avoid using US dollars in trade between the nations, as Beijing ratchets up the pressure on Washington.

In a bid to force the US to relax its grip on global financial institutions, China yesterday announced a deal allowing Argentine businesses to buy Chinese imports directly in yuan. Usually, international trade is conducted in US dollars, which Argentine companies have to buy with pesos.


The currency swap with Argentina is the first between China and a Latin American, but follows similar deals to bypass the dollar recently concluded by Beijing with South Korea, Indonesia and Malaysia - driving growing expectation that Asia will steadily be transformed into a "yuan bloc".
China has been pushing to end the dollar's international dominance as a currency..."

http://www.theaustralian.news.com.au...-36418,00.html

[*T*]

Re: China and Argentina Agree to Trade Using Own Currencies

When oil is traded that way, and not just by Iran, we're done.

[GRG55]

Re: China and Argentina Agree to Trade Using Own Currencies

China strikes again, after similar deals with South Korea, Indonesia, and Malaysia. The obvious purpose: to avoid the need for dollars, which they've used up till now in their bilateral trade.

"CHINA and Argentina have agreed to swap $14.5 billion of their currencies to enable South America's second-largest economy to avoid using US dollars in trade between the nations, as Beijing ratchets up the pressure on Washington.

In a bid to force the US to relax its grip on global financial institutions, China yesterday announced a deal allowing Argentine businesses to buy Chinese imports directly in yuan. Usually, international trade is conducted in US dollars, which Argentine companies have to buy with pesos.


The currency swap with Argentina is the first between China and a Latin American, but follows similar deals to bypass the dollar recently concluded by Beijing with South Korea, Indonesia and Malaysia - driving growing expectation that Asia will steadily be transformed into a "yuan bloc".
China has been pushing to end the dollar's international dominance as a currency..."

http://www.theaustralian.news.com.au...-36418,00.html

The article doesn't say what China is going to do with all those Argentine pesos...based on history one of the currencies in this world that regularly makes the US Dollar look sound.

Maybe they intend to quickly swap them back to the Argentines for some of their wheat and soy [assuming the Argentine farmers settle with their own government and export any]...;)

[don]

Re: China and Argentina Agree to Trade Using Own Currencies

When oil is traded that way, and not just by Iran, we're done.

See: Abrams Main Battle Tank

See also: Wellhead

[Retired Commish]

Re: China and Argentina Agree to Trade Using Own Currencies

World Traveler:
"CHINA and Argentina have agreed to swap $14.5 billion of their currencies to enable South America's second-largest economy to avoid using US dollars in trade between the nations, as Beijing ratchets up the pressure on Washington.
So what are the real effects of this action? As I see it, each has booked $14.5 in trade for their respective economies. Each has eliminated the middleman (international bankers) so have achieved a discount on that trade.
Should create a reduction in demand for dollars. Not really far different than a straight barter arrangement.
However, both have to use a common denominator (dollar) to arrive at the true trade value of their respective currencies and don't forget the fact that the Chinese are directly pegged to the dollar while the peso floats to whatever level the currency markets say it is worth. Crazy world. Essentially trading real product value for respectively worthless paper.
By the way, if you see my son who is traveling in Argentina at the moment, tell him to send me a good steak, that is overly abundant there. :-)

[Sapiens]

Re: China and Argentina Agree to Trade Using Own Currencies

So what are the real effects of this action? As I see it, each has booked $14.5 in trade for their respective economies. Each has eliminated the middleman (international bankers) so have achieved a discount on that trade.
Should create a reduction in demand for dollars. Not really far different than a straight barter arrangement.
However, both have to use a common denominator (dollar) to arrive at the true trade value of their respective currencies and don't forget the fact that the Chinese are directly pegged to the dollar while the peso floats to whatever level the currency markets say it is worth. Crazy world. Essentially trading real product value for respectively worthless paper.

You have to look at the big picture to comprehend this Chinese move.

China has enough Treasuries to fractionalize their own “Dollars” on their books, they can extend credit with those new fractionalized “Dollars” to Argentina, but first, they need to develop a trade relationship and gain “confidence” from the Argentines, in order for the Argentines to exchange their wealth (Natural resources) for this new fractionalized “Dollar”.

It is the Grand Chess Board…