Already in March, China surpassed the U.S. as Brazil's biggest trade partner, and the trip seems to signal even further shifts in the global economic arena: namely, the U.S. out, China in. Or, perhaps more realistically - the U.S. down, but not (yet?) out; China up, and rising:
"I think the trip that I am about to embark on... is one of the most important I am going on to defend a new economic order and a new commercial policy in the world," Lula told reporters before leaving Brazil.Roberto Jaguaribe, a Brazilian foreign ministry official, said last week the trip represented a "reorganisation of the international scene" in which the top emerging economies were playing a bigger role in world affairs.
Among the more curious agenda items to be discussed between Lula and Hu is Lula's proposal that the countries conduct bilateral trade through each nation's currency, removing the U.S. dollar as an intermediary. Silva has been urging the end of the use of the American dollar in South American trade for some time now, suggesting such a move would reduce transaction costs for both exporters and importers, especially those operating on a smaller scale. Brazil and Argentina have agreed to trade with each other using their own currencies, and China and Argentina have likewise agreed to establish a 70 billion yuan ($10.24 billion) currency swap system that will enable trade between the two nations to be settled in Chinese currency. Might we be witnessing the gradual usurping of the U.S. dollar as the world's currency reserve by the Chinese yuan?
Such a reality may still be some way off, but the Chinese are slowly laying the ground for the yuan's ascendance, one bilateral negotiation at a time.