Iran and China are planning to sign a currency swap agreement, according to Iran’s ambassador to Beijing, Ali Asghar Khaji.
Iran has been trying to avoid dollar transactions since the imposition of economic sanctions a decade ago and gradually replace the US currency with the Chinese yuan, euro, Turkish lira, Russian ruble, and South Korean won, eghtesadnews reported.
On the benefits of a currency swap deal with China, according to Majid-Reza Hariri, deputy head of the Iran-China Chamber of Commerce is that “Such an agreement will ease Iran’s access to the markets where Chinese yuan is used. It would also reduce transaction costs in foreign trade as it excludes the greenback as the intermediary currency.”
The official, however, stressed that trading in local currencies “will not necessarily translate into larger trade volume.”
China is Iran’s biggest trading partner accounting for 25% of the country’s foreign trade. Strong trade ties between the two sides have paved the way for boosting bilateral monetary and banking relations.
China is boosting its efforts to popularize its currency. According to the People’s Bank of China, the country’s central bank, Beijing has signed currency swap agreements with 32 countries as of the end of May 2015, with the total value hitting 3.1 trillion yuan ($484.8 billion).
The IMF also plans to add the Chinese currency to its Special Drawing Rights (SDR) basket from October 1, 2016 with a weighting of 10.92% which will give Beijing’s global ties a huge boost.
