Argentina Allows Commercial Banks to Open Deposit Accounts in Chinese Yuan
Argentina is facing a severe shortage of the US dollar, which is widely used in global trade. As a result, the country has taken a bold step by allowing commercial banks to open deposit accounts in the Chinese yuan. The Central Bank of Argentina announced the move, stating that the yuan will now be accepted as a form of currency in savings and checking accounts.
This decision comes as Argentina grapples with a significant decline in the value of its currency, the Argentine peso, against the US dollar. Since the beginning of 2020, the peso has fallen nearly 80% against the greenback, further exacerbating the shortage of US dollars in the country.
In an effort to address this shortage, Argentina has increasingly turned to the yuan as an alternative currency. In April, the country started paying for imports from China in yuan, and more recently, it made a $2.7 billion payment to the International Monetary Fund using the Chinese currency.
The shortage of US dollars in Argentina can be attributed to several factors. Firstly, the country’s central bank dollar reserves are at their lowest level since 2016 due to a drought that has affected agriculture exports. This led to a decrease in exports, which are predominantly denominated in US dollars. Additionally, the significant devaluation of the Argentine peso against the dollar has made it more expensive for the country to acquire the greenback.
These circumstances have created an opportunity for the yuan to gain traction in Argentina. China has been pushing for the internationalization of its currency and has been using the yuan for a majority of its oil purchases from Russia. In Argentina, the volume of yuan transactions in the currency market has increased significantly, with over 500 companies exploring the option of paying for imports in the Chinese currency.
However, not everyone is convinced about the shift away from the US dollar. Javier Milei, a prominent presidential candidate in Argentina, has proposed replacing the peso with the greenback as the country’s local currency to combat inflation.
The Argentine central bank did not provide immediate comment on this development. As Argentina continues to face a shortage of US dollars, the acceptance of the yuan in deposit accounts marks a significant step in diversifying the country’s currency reserves and exploring alternatives to the greenback.
Source: Business Insider