With the announcement of China's GDP number in Q1, its foreign exchange reserves officially passed the $3 trillion mark – gigantic, unprecedented. And around 70% of the total is in US dollar. Both numbers need to come down.
China is trying hard to internationalize its currency – Yuan. In the ongoing BRICS meeting in Sanya, Hainan, the heads of the five countries signed a new pact, according to WSJ,
As part of the effort to reduce reliance on the dollar, the state development banks of the five countries agreed to open credit lines in their national currencies to each other. The framework credit-line agreement was signed by Russia's Vnesheconombank, Brazil's Banco Nacional de Desenvolvimento Economico e Social, China Development Bank Corp., Eximbank of India, and the Development Bank of South Africa. However, details and regulations, as well as the projects eligible for such financing, are yet to be defined in the framework deal.
China Development Bank plans to issue about 10 billion yuan of loans in the Chinese currency this year to other Brics nations, mostly to fund oil and gas projects, Chairman Chen Yuan said at a news briefing. The state lender is in talks with Brazilian state-owned Petroleo Brasileiro SA, or Petrobras, regarding further loans for the oil company, Mr. Chen said.
China and Brazil reached a $10 billion oil-for-loan deal in 2009, under which Petrobras agreed to supply crude oil to China Petrochemical Corp. for 10 years in exchange for funding from China Development Bank.
Russia's Vnesheconombank is also in talks with China Development Bank to borrow at least $500 million of yuan for a currency swap between the two lenders, VEB's Chief Executive Vladimir Dmitriev said on the sidelines of the summit.
He added that the Brics countries are moving toward mutually trading each others' currencies, following Russia's launch of yuan trading in Moscow at the end of 2010.