Argentina Allows Banks to Open Yuan Accounts, Boosting Chinese Currency as Safe Haven Alternative to US Dollar

July 6, 2023

By Anjali Kochhar

In a significant move aimed at diversifying its foreign currency holdings, Argentina’s central bank has officially authorized the inclusion of the Chinese yuan as a recognised currency for bank deposits. The decision comes as Argentina grapples with a dwindling supply of U.S. dollars and seeks to explore alternative options for conducting international trade and mitigating financial risks.

The Central Bank of the Argentine Republic announced last week that financial institutions in the country are now permitted to open bank accounts denominated in renminbi yuan, according to an official statement translated by Google. This move aligns with China’s ongoing efforts to promote the internationalisation of its currency and marks another step forward in strengthening bilateral economic ties between the two nations.

The incorporation of the Chinese yuan as a recognised currency for deposit-taking in savings and checking accounts is expected to attract individuals and enterprises looking for a potential safe haven alternative to the U.S. dollar. By providing the option to exchange Argentinian peso to yuan, the move offers an additional avenue for diversifying foreign currency holdings, reducing reliance on a single dominant currency, and addressing the shortage of U.S. dollars in Argentina.

Economists and industry experts have weighed in on the significance of Argentina’s decision. Dong Jinyue, a senior China economist at BBVA Research, stated that the opening of yuan accounts could entice more people and businesses to consider the yuan as a “safe haven” currency, rather than solely relying on the U.S. dollar. This development is expected to alleviate the U.S. dollar shortage in Argentina and contribute to the broader diversification of foreign currency exchange.

Stephen Olson, a senior research fellow at the Hinrich Foundation, highlighted China’s growing discomfort with the pre-eminent role of the U.S. dollar in global trade, particularly amid rising geopolitical tensions. Analysts and financial experts have long speculated on the potential for the Chinese yuan to challenge the dominance of the U.S. dollar in international financial markets. Some foresee the yuan gradually eroding the dollar’s position as the world’s primary reserve and settlement currency, with expectations of a proposed common BRICS currency further challenging the U.S. dollar’s hegemony.

Argentina’s decision to authorise yuan accounts follows other recent developments, including the allowance of renminbi-denominated securities by the National Securities Commission and a bilateral currency swap agreement signed between Argentina’s Central Bank and the People’s Bank of China.

As Argentina embraces the Chinese yuan and diversifies its foreign currency holdings, it signals a potentially transformative shift in global currency dynamics. The impact of this move on the international financial landscape and the U.S. dollar’s position as the dominant reserve currency will undoubtedly be closely watched by economists, policymakers, and market participants in the years to come.

About the author

Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.

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