China is reportedly to begin extending loans in yuan to BRICS countries in another step towards internationalizing the national currency and diversifying from the US dollar.
The Chinese Development Bank wants to sign a memorandum of understanding with the country's partners from BRICS group of developing countries on increasing yuan-denominated loans, while partners increase loans in their national currencies, The Financial Times reports, citing people familiar with the talks.
The move aims to increase trade volumes between the five nations and diversify from using the US dollar.
Brazil and South Africa were quick to react to the proposal, saying they expect the lending pledge to be included into a master agreement to be signed in New Delhi on March 29.
“We will discuss the creation of structures and mechanisms for lending in local currencies in order to maximize economic and financial transactions between the countries that are members of the accord,” Brazil’s development bank BNDES said.
China, with 54 per cent of its foreign reserves in US dollars, has been trying to diversify from the currency it believes will weaken soon and for a protracted period.
China agreed to use national currencies with Russia, Belarus and Japan for bilateral trade. The country also decreased its foreign reserves in dollars recently in favor of the Australian and Canadian currencies.