Following a dire shortage of USD in Argentina, commercial banks are now allowed to open deposit accounts in the Chinese yuan, as per the announcement made public by the bank on 29 June 2023. The statement highlights the move as being complementary to the country’s securities regulator’s announcement that Argentina can issue securities in the Chinese currency.
Already allowing bank accounts to be opened leveraging US dollar deposits, Argentina has been increasing its usage of the yuan following a substantial shortage of the greenback. In April 2023, the country began carrying out payments for imports from China in the yuan, and shortly after in June, Argentina partly made a USD 2.7 billion payment to the International Monetary Fund using the yuan, as reported by the Buenos Aires Times, citing sources from the country’s economy ministry.
Argentina’s move to turn to the yuan as an alternative currency followed the fact that its central bank dollar reserves have been reported at their lowest level since 2016, partly due to a continuous drought that affected the region’s agriculture exports, as per a June 2023 Bloomberg report. The drought resulted in Argentina selling fewer crops, sales of which are denominated worldwide in the USD, which in turn led to a dollar crunch, as detailed by the Markets Insider. What is more, this means that the country was faced with increased difficulties in trading internationally, as commodities are generally denominated in the dollar.
Additionally, as detailed in the announcement, the Argentinian peso had crashed against the dollar, falling 30% in 2023, thus making it increasingly expensive for the region to purchase any greenback, with the peso having lost approximately 80% of its value against the greenback from the beginning of 2020 and onwards. These developments opened an ‘opportunity window’ for the yuan, which has been tried to be internationalised by Beijing.
Business Insider reported in May 2023 that China has been looking to increase the global circulation of the yuan, having leveraged the currency for almost the entirety of the Russian oil it purchased throughout the past year, with this having been confirmed by Reuters who cited numerous trading executives that had direct knowledge of the matter.
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