Russia is not the only major economy to use the Chinese currency for trade settlements as more and more nations seek alternatives to the greenback

When Russia’s foreign exchange reserves were frozen and the country was cut off from the SWIFT messaging system in light of the Ukraine conflict, Moscow turned to other settlement options, including the yuan. However, Russia is by no means alone in making use of the Chinese currency. In recent years, several other major global economies have already begun using the yuan or are considering doing so. As Russia and many nations in the Global South seek to extricate themselves from the increasingly capricious dollar hegemony, the prominence of the yuan is only set to rise.

RT examines which major countries are turning toward the Chinese currency.

Russia
Russia far and away leads the pack in terms of the use of the yuan. Having borne the brunt of the increasingly draconian weaponization of the Western financial system that has essentially precluded Russia from euro and dollar settlements, Moscow has increasingly been using the yuan in foreign trade. The Chinese currency was used in 34% of Russian imports and 25% of exports as of July 2023, according to the most recent data available from Russia’s central bank. Some of that increase is attributable to increased imports from China itself, but use of the yuan to settle imports from third countries – those with swap lines open with China’s central bank – has also risen.
However, the penetration of the yuan in Russia goes far beyond trade settlement. Russia is now the third-largest clearing center for offshore yuan transactions. The yuan has become the most traded currency on the Moscow Exchange, while the first yuan-denominated exchange-traded fund launched on the exchange in January 2023. The yuan now has a more prominent place in Russia’s sovereign wealth fund after a restructuring in late 2022 aimed at reducing Russia’s exposure to the currencies of so-called unfriendly countries (those that support sanctions). Meanwhile, a number of major Russian corporates have floated yuan-denominated bonds over the past two years, a move that underscores the currency’s growing importance beyond trade. Aluminum giant RUSAL was the first to tap the yuan market, followed by oil major Rosneft and gold miner Polyus.

Argentina
China and Argentina opened a bilateral swap line worth $11 billion back in 2014. This allows the two countries to exchange currencies at predetermined interest rates and exchange rates. In April 2023, Argentina accessed $1.04 billion in yuan to pay for Chinese imports. The limit was later extended to give Buenos Aires access to more funds. For Argentina, whose foreign exchange reserves are depleted and whose history of defaults has made investors skittish about lending, accessing yuan funding has at times been a critical lifeline.
Argentina has also used the yuan to pay debts to the IMF, the first time a South American country has employed the Chinese currency to settle debt obligations and an important milestone that may open the door to broader uses of the yuan beyond trade settlement. An IMF Staff Country Report from August 2023 shows that the swap line with China accounted for a significant portion of Argentina’s central bank reserves (available swap lines can be counted as reserves) and is an important source of short-term liquidity in order to pay debts and finance imports. This has been particularly important in light of Argentina’s critically low foreign exchange reserves.
However, despite China’s role in providing vital support to the Argentine economy, newly installed President Javier Milei has sought to distance himself from China, claiming that his country would no longer work with “communist” regimes and reportedly likening the Chinese government to an “assassin.” In light of this, on December 21, 2023, China withdrew the swap line until Milei demonstrates a commitment to working constructively with Beijing, according to Argentine media reports. A spokesman for the Chinese Embassy in Argentina declined to confirm the reports. The loss of cheap funding comes at a fraught time for Argentina, which is battling a severe financial crisis and runaway inflation.

Saudi Arabia
Of the many swap lines China has opened with central banks around the world over the last decade, arguably none have reverberated as loudly as the one reached with Saudi Arabia this past November. The line is worth 50 billion yuan ($6.98 billion). While the sum itself is not large relative to the trade volume between the two countries, the move is highly symbolic given Saudi Arabia’s crucial role at the very genesis of the so-called petrodollar system. Moreover, many analysts believe that this swap line is only the beginning and that Beijing and Riyadh may have a much larger collaboration in the pipeline.
China surpassed the US as Saudi Arabia’s largest trading partner in 2011, exchanging over $64 billion worth of goods that year. The countries have subsequently been increasing turnover, which passed the $100 billion mark in 2022. Saudi Arabia became China’s largest oil supplier in 2020, although in 2023 Russia overtook the Kingdom. For Saudi Arabia, the currency swap deal is an opportunity to diversify its foreign currency reserves. As the world’s largest oil exporter, Saudi Arabia has long been tied to the US dollar as its main source of currency for oil transactions.
A Wall Street Journal report from May 2022 indicated that the two countries were in talks about launching Chinese imports of Saudi oil in yuan. So far, nothing has been announced, but the recently opened swap line clearly lays the groundwork for such a move. A switch to Saudi oil being priced in yuan would deal a blow to the petrodollar, which has been a major underpinning of the dollar’s dominance since the 1970s when Riyadh agreed to only price in dollars.

Brazil
In February 2023, Brasilia and Beijing reached an agreement to set up yuan-clearing arrangements in Brazil, thus paving the way for the Chinese currency to be used in settlements. Shortly thereafter, Brazil was also given access to the Chinese equivalent of the SWIFT messaging system, the Cross-border Interbank Payment System.
In April, China and Brazil reached a currency swap agreement that completely removed the dollar as an intermediary. While on an official visit to China that month, Brazilian President Luiz Inacio Lula da Silva criticized the dollar’s dominant role in global trade: “Why should every country have to be tied to the dollar for trade?… Who decided the dollar would be the [world’s] currency?
Although just over 90% of Brazil’s foreign commerce continues to be in dollars, the share of other currencies is rising. Meanwhile, Brazil’s yuan-denominated foreign-exchange assets reached a high of 5.37% of the total by the end of 2022, surpassing the euro to be the second-largest reserve currency in Brazil’s war chest. Just five years ago, Brazil had no yuan holdings.

Iran
Like Russia, Iran has been essentially cut out of the Western financial system and has long been looking for alternatives. China began buying some oil from Iran with payment in yuan back in 2012, and the two countries have been in discussions about boosting local-currency settlement of trade. However, as Iranian Economy Minister Ehsan Khandouzi has admitted, much work remains to ease the use of the Chinese currency. Meanwhile, in 2018, in a gesture that may have more symbolic value, Iran replaced the dollar with the yuan on its official currency rate reporting platform.