Governor of the People's Bank of China Yi Gang (second from left) meets Argentine Economy Minister Sergio Massa (first from left), Miguel ángel Pesce, President of the Central Bank of Argentina (third from left) and Sabino Vaca Narvaja, Ambassador of Argentina to China. Photo: Courtesy of the Argentine Embassy in Beijing

The enabling of Chinese yuan accounts in the Argentine banking system is a great advancement in reducing exchange rate costs, promoting financial efficiency and currency diversification, Argentine Ambassador to China Sabino Vaca Narvaja told the Global Times in an exclusive written interview on Friday.

The remark was made in response to the latest move by the Central Bank of Argentina to allow the country's commercial banks to open customer accounts in yuan. According to a statement published on its website, the central bank on Thursday said it had granted banks permission to take deposits in yuan, while it increases its yuan sales almost daily to finance imports.

This new measure is aimed at alleviating the scarcity of US dollar reserves and promoting the use of the Chinese currency for international transactions, according to media reports.

"The decision of the Central Bank of Argentina is very important because my country, in addition to supporting the internationalization process of the yuan, is betting on a more diverse monetary system where we do not need to use a third currency for exchange between our countries or with our main trading partners," Narvaja told the Global Times.

This reduces financial costs and promotes the democratization of the currency basket on the international level, the ambassador said.

The move came just three weeks after the recent visit by the Argentine Economy Minister Sergio Massa, to China together with other government representatives in early June, during which a cooperation plan to promote Belt and Road Initiative was signed, which includes, among its 13 working sectors, a central element such as cooperation in monetary and fiscal matters.

During the visit, the People's Bank of China and the Central Bank of Argentina renewed the bilateral local currency swap agreement, with a swap scale of 130 billion yuan per 4.5 trillion pesos and a validity period of three years, as the two countries ramp up efforts to enhance financial cooperation and trade facilitation.

The renewing of the currency swap mechanism has consolidated the path of expanding the use of local currencies, which has been very successful for economic exchanges between Argentina and China, Narvaja said.

Since the activation of this mechanism, announced in the bilateral meeting between the leaders of the two countries during the G20 summit in Bali last November, exchanges using yuan as the currency has grown exponentially, the envoy said.

"This new step announced by the Central Bank of Argentina to enable yuan accounts in the Argentine banking system is a great advancement in this direction of using local currencies, and it adds to many previous actions such as the opening of an electronic open market for spot and futures transactions in yuan," Narvaja said.

Likewise, the recent authorization granted to the Chinese credit card issuer, UnionPay, for the operation of transactions by all its clients in Argentina, allows them to settle with non-residents at the same value as financial dollars. The ambassador said that such moves are extremely relevant both for promoting Chinese tourism and consumption in Argentina and for ensuring traceability.

Narvaja stressed that the expansion of the use of yuan is possible due to the complementary economic nature that China has with most countries in Latin the American region and the spirit of shared work proposed for joint collaboration without any impositions.

"Argentina, like many emerging countries, advocates for a change in the global financial architecture in international organizations so that it is not oriented toward a speculative matrix. That is why we support the reform of the system in all multilateral forums, aiming to direct it toward the real economy and productive system," the ambassador further noted.

The ambassador highlighted the recent words of Brazilian President Lula Da Silva during his recent visit to China when he asked, "Why all countries have to base their trade on the dollar? Why can't we do trade based on our own currencies? Who was it that decided that the dollar was the currency after the disappearance of the gold standard?"

The ambassador said that institutions such as the People's Bank of China, the Asian Infrastructure Investment Bank (AIIB), and the New Development Bank (NDB), are doing a lot to build a fairer financial system.

"Argentina is betting on this new path and has recently joined as a member of the AIIB and formally requested to join the NDB of the BRICS…we firmly believe that a more harmonious and balanced multi-polar world, without any impositions, will be a reality if we work together," he said.

"In this sense, the concrete progress that many emerging countries are making in that direction is a good example."