- China intends to extend renminbi loans to other Brics nations.
- The initiative aims to boost trade between the five nations and promote use of the renminbi for international trade and cross-border lending.
- Representatives of the five nations called for a broader-based international currency system in a communiqué issued after a meeting in China in April.
China intends to extend renminbi loans to other Brics nations, in another step towards the internationalisation of its currency.
The China Development Bank will sign a memorandum of understanding in New Delhi with its Brazilian, Russian, Indian and South African counterparts on March 29, say people familiar with their talks. Under the agreement CDB, which lends mainly in dollars overseas, will make renminbi loans available, while the other Brics nations' development banks will also extend loans denominated in their respective currencies.
The initiative aims to boost trade between the five nations and promote use of the renminbi, rather than US dollar, for international trade and cross-border lending. Under 13 per cent of China's Asia trade is transacted in renminbi, according to Helen Qiao, chief Asia economist for Morgan Stanley. HSBC estimates that the currency's share of regional trade could swell to up to 50 per cent by 2015.
BNDES, Brazil's development bank with a loan book about four times the size of that of the World Bank, and South Africa's finance ministry said they expected a master agreement to be signed in New Delhi that would include the lending pledge, with details to be ironed out during a summit.
"We will discuss the creation of structures and mechanisms for lending in local currencies in order to maximise economic and financial transactions between the countries that are members of the accord," BNDES said.
CDB declined to comment. Other signatories will include Russia's Vnesheconombank, Export-Import Bank of India and the Development Bank of Southern Africa.
Representatives of the five nations called for a broader-based international currency system in a communiqué issued after a meeting in China in April.
While the US dollar has recently strengthened, many governments believe it will weaken over the longer term and want alternatives, other than the tarnished euro, to use for trade and investment. CDB recently extended a $30bn loan to Petróleos de Venezuela, the state company, half of which will be repaid in oil.