The yuan trade is “booming” after the US$5 billion China swap, according to sources in the banking sector, as companies are using all available resources to import in the context of an extreme lack of dollars. In April alone, import approvals were issued for more than US$1 billion, but the number is expected to grow: only in the last two weeks, 12 banks started to look for a way to operate with the Chinese currency, after a massive influx of inquiries from their corporate clients.
Some banks, such as Banco Nación or HSBC, have their own correspondent banks in China, which means they could operate in yuan. However, there are many others —private, public and provincial— that are considering operating in pesos that later get converted to yuan by opening accounts at the RMC Clearing Bank, owned by Chinese bank ICBC, which has Banco Nación authorization to make that exchange (compensation and liquidation services).
What they can do is provide the “clearing” service in yuan to compensate balances in pesos with that currency, and thus pay for an import to a different company that operates with a bank from China or any other country that admits that currency. Unlike the dollar or the euro, the yuan is not directly convertible, so you need the intermediation of a bank that has gone through the habilitation procedure.
In the last 15 days alone, 12 banks have inquired about using this clearing service, and one of them is about to start doing so. To illustrate the size of the phenomenon, sources from a commercial bank commented that the number of operations with yuan so far this year (five months) is already higher than all of 2022.
In their everyday business, companies keep operating with their usual banks. However, what changes for them is the procedure to request approval by the SIRA import authorization system, where they must state that they will pay in yuan. While the periods to access currencies are similar (60, 90, or 180 days, depending on the company size and industry) the approval can be more expeditious. Still, those who choose yuan will not be able to opt for dollar payments later.
Therefore, before requesting this authorization, companies must have a previous agreement with their Chinese suppliers in order to pay in yuan. Sources within the finance sector said all kinds of companies are already operating this way, from small to big businesses, and across all sectors, from automotive to tech companies.
So far, China has enabled the use of 35 billion yuan (close to US$ 5 billion) for commercial payments. In April alone, approved imports in yuan equaled US$1.087 billion, half of the purchases being made in the Asian country, according to sources from the Foreign Trade Secretariat.
However, the currency swap with China is in place for 130 billion yuan, which equals some US$18.5 billion. In fact, Economy Minister Sergio Massa anticipated that Argentina could go up to US$19 million in the use of swap “depending on political conditions and approval by the Chinese Central Bank”, as he commented to business executives from Amcham (the US Chamber of Commerce) last week.
In fact, Massa is traveling to Beijing on May 29 and his agenda includes the swap, as well as the search for direct investments in the Silk Road, and securities from BRICS banks in order to facilitate imports from Brazil, the country’s main trade partner.
China’s geopolitical interest is not just to have a firm base in Latin America.
“In China they want the yuan to become one of the main currencies for international trade, and stop being a currency that is swapped with another,” said sources from the finance sector.
In 2022, China was the main source of Argentine imports, for US$17.5 billion.