Latest News:  
Beijing   Cloudy/Overcast    32 / 22 ℃  City Forecast

Home>>China Business

Nations in $30b currency exchange pledge

By Qin Jize and Zhang Yunbi (China Daily)

10:47, June 24, 2012

China, Brazil boost economic bonds

China and Brazil on Friday announced a $30 billion currency exchange, a step toward a broader agreement among emerging economies to pool resources as a bulwark against world financial uncertainties.

The swap, worth the equivalent of 190 billion yuan or 60 billion real, is one of the measures to reinforce financial reserves of the two countries at a time when the global economy is stressed, Brazilian Finance Minister Guido Mantega said.

"We recognize that developed economies are still in crisis. The BRICS (Brazil, Russia, India, China and South Africa) are the most dynamic, and we'll continue to expand," Mantega told media at the United Nations' sustainable-development conference, Rio+20, in Rio de Janeiro.

The currency agreement came out of a meeting between Premier Wen Jiabao and Brazilian President Dilma Rousseff during Rio+20 on Friday morning. It went a step beyond the recently concluded G20 summit in Los Cabos, Mexico, where on Monday leaders from all five BRICS members said that they would consider forming a foreign-exchange reserve pool and a swap arrangement, as financial problems threaten to spread globally.

Exchange deals, which allow nations' central banks to lend money to each other to keep markets liquid, and the pooling of foreign-exchange reserves, will help BRICS countries fight market illiquidity, bolster their immunity to financial crises and increase global confidence, said Zhang Yuyan, director of the Chinese Academy of Social Sciences' world economics and politics institute.

Zhao Xijun, deputy dean of the School of Finance at Renmin University of China, said the swap helps "enterprises of both countries to eliminate the potential risks of currency fluctuations brought by a third currency, such as the United States dollar or euro, and further boosts imports and exports between the two countries".

He said some Chinese banks are planning to open branches in Brazil.

The currency swap, one of China's countermeasures to the problems that haunt the existing US dollar-led international currency system, is also a tip for the BRICS nations to maximize their interests and minimize risks of uncertainties in currency, Zhao said.

"For the global economy, which is haunted by the European debt crisis, the swap may push reform of the international financial system to fix the loopholes," he said.

Brazil's exports to China last year stood at $44.3 billion, an increase of more than 43 percent from the previous year, the Brazilian Ministry of Development, Industry and Foreign Trade reported. In 2009, growth in trade with China made the country Brazil's No 1 trading partner, surpassing the US.

Colin Bradford, a senior fellow at the Center for International Governance Innovation, a think tank in Canada, also said it makes sense for BRICS countries to adopt such a mechanism, and that it should not in any way be seen as a threat to Western economic powers.

The BRICS "are providing the same game to make the global economy work", said Bradford, who attended the G20 meeting in Mexico as an observer. "There is a way in which these kinds of revolutions can be healthy for the overall global community." On Friday, the two biggest emerging economies also agreed to upgrade their relations to a "comprehensive strategic partnership", a move that analysts said highlights the countries' growing influence in the world economy.

During the meeting on Friday, Wen said China and Brazil should seize the opportunity to enhance financial cooperation and encourage settlement of bilateral transactions in local currencies as well as direct trading of the Brazilian real and the yuan.

After almost 90 minutes of closed-door talks between Wen and Rousseff, their governments issued a joint statement covering a broad set of agreements that will bind them more closely.

One is a 10-year cooperation pact that includes expanded two-way investments and increased exports of Brazilian-made goods to China.

Another agreement lets Brazil's Embraer sell Legacy 650 business jets in China and manufacture Legacy 600 and 650 aircraft in China through the Aviation Industry Corporation of China. Embraer said its China joint venture, Harbin Aircraft, will deliver its first plane in late 2013.

Others deals announced Friday involve cooperation in aerospace, technology, agriculture and education.

The two countries decided to establish a foreign minister-level comprehensive strategic dialogue at least once a year and will jointly launch the first of two weather satellites within 12 months.


Leave your comment0 comments

  1. Name


Selections for you

  1. Activities held across China to celebrate Dragon Boat Festival

  2. Traditional Han costume seen at ceremony to honor Qu Yuan

  3. Mengshan Mountain Giant Buddha - the second largest in the world

  4. Division in long-range transportation drill

Most Popular


  1. Chinese banks must go global
  2. Trade is tool to fix global economy
  3. Skyscraper frenzy brings loan risks to new heights
  4. China to 'maintain 8% growth for over 20 years'
  5. Larger labor force not a panacea for pension woes
  6. "China Containment theory" has no market
  7. Benefits of direct yen-yuan may be few, far between
  8. Keeping up appearances online proves tough job
  9. Why China's export growth rebounds robustly
  10. Don’t hate the trader, hate the securities game

What's happening in China

Life in drug rehabilitation center in Hebei

  1. Shanghai tightens restrictions on home purchase
  2. Farmer turns hillsides into terraces to fight poverty
  3. China refutes IPR enforcement deteriorating
  4. China encourages private energy investment
  5. China in uphill battle against poverty

China Features

  1. Left-behind kids have 'dream house'
  2. China's Olympic history: The road to success
  3. Eight systems of Shenzhou-9 manned spacecraft
  4. The thousand-year-old Tibetan paper
  5. Beijing Summit features five new aspects

PD Online Data

  1. Spring Festival
  2. Chinese ethnic odyssey
  3. Yangge in Shaanxi
  4. Gaoqiao in Northern China
  5. The drum dance in Ansai