Argentina allows banks to open yuan accounts: Economist says it could boost Chinese currency as safe alternative to US dollar

Argentina’s central bank has officially included the Chinese yuan as a recognized currency for making deposits into bank accounts. “Opening yuan accounts could entice more people and businesses to exchange Argentine pesos for yuan, more or less as a ‘safe haven’ currency, rather than exchanging all their local currencies for US dollars,” explained one economist.

Banks in Argentina now allowed to open yuan accounts

Argentina’s central bank announced on Thursday that it now allows the Chinese yuan in bank accounts.

Argentina’s central bank’s decision to incorporate the Chinese yuan is in line with the country’s struggle against the dwindling supply of US dollars. The move also coincides with China’s ongoing efforts to promote the internationalization of its currency.

In addition, Argentina’s National Securities Commission announced in June that it would allow trading in renminbi-denominated bonds. Earlier this month, the central bank of China, the People’s Bank of China (PBOC) and the Central Bank of Argentina signed an agreement for a bilateral currency swap of 130 billion yuan (US$17.9 billion) over three years.

BBVA Research Senior Economist Dong Jinyue was quoted by the South China Morning Post as saying:

   Opening yuan accounts could entice more people and businesses to exchange Argentine pesos for yuan, more or less as a "safe haven" currency, rather than exchanging all local currency for US dollars.

“Currency diversification will certainly help alleviate the shortage of US dollars in Argentina, because US dollars do not become the only foreign currency to be exchanged,” he opined.

Some people believe that the Chinese yuan has the potential to erode the US dollar’s dominance in global financial markets, including TD economist Vikram Rai. President of Russia’s VTB bank Andrey Kostin, which is under US sanctions, said in May that the Chinese yuan could replace the US dollar as the world’s main reserve and settlement currency as early as the next decade. In addition, many people hope that a proposed BRICS common currency will challenge the hegemony of the dollar.