China and Japan agree to stop using the dollar
The governments of China and Japan signed a foreign exchange swap agreement worth 30,000 million dollars, in order to intensify bilateral cooperation in areas such as trade, eliminating the need to use the dollar as currency.
The agreement was signed by the prime ministers of China and Japan, Li Keqiang and Shinzo Abe, respectively, in Beijing, as part of a plan promoted by both countries to promote financial stability and facilitate bilateral economic and financial exchanges.
“With the strengthening of economic and financial ties between Japan and China, Japanese financial institutions have been expanding their business based on renminbi (official name of the Chinese currency),” said the Central Bank of Japan in a statement.
Thanks to the agreement valid for three years, both countries will be able to exchange payments in one currency for equivalent amounts in the other, which will facilitate bilateral commercial liquidations.
The pact took place at a time when Beijing is trying to strengthen its trade ties with other countries in local currency and discard the dollar, in an attempt to neutralize US sanctions against it.
China, along with Russia, Turkey and Iran are among the countries that have decided to substitute the dollar for their national currencies in foreign trade transactions; a measure that could cause the US currency to lose its status as a world reserve currency.
Faced with US economic pressures at global level, the holdings of US Treasury bonds have also fallen, which has worried investors because of the growing budget deficit in the North American country.
Japan in June got rid of 82,900 million dollars, that is, 7% of its holdings of Treasury bonds, while the share of China in Treasury bonds decreased by 138,000 million dollars.
With info from China Daily
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