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The Dollar-Renminbi Tango: The Impacts of Argentina’s Potential Dollarization on its Relations with China

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  • Xiaofeng Wang
  • Otaviano Canuto

Abstract

The surprising victory of Javier Milei, the unconventional ‘anarcho-capitalist’ candidate, in the August primaries ahead of Argentina’s October 2023 general election, can be largely credited to his commitment to dollarize the Argentine economy, a move perceived as the ultimate solution to bring an end to the nation's economic turmoil. The potential shift from the local currency to the dollar has sparked concerns about Argentina's bilateral currency swap line with China. This swap line plays a crucial role in their bilateral relations and has also served as a means for Argentina to fulfill its debt obligations to the International Monetary Fund. The swap line is seen as a key element in preventing Argentina from defaulting on its IMF obligations, which is vital for both its economic and international financial stability. Given the significance of these developments, this article explores Argentina's potential shift towards dollarization and its implications for the country's relationship with China. It does so by assessing the critical role of the bilateral currency swap line between the Central Bank of Argentina (BCRA) and the People's Bank of China (PBOC) in backing Argentina's external payments.

Suggested Citation

  • Xiaofeng Wang & Otaviano Canuto, 2023. "The Dollar-Renminbi Tango: The Impacts of Argentina’s Potential Dollarization on its Relations with China," Policy briefs on Economic Trends and Policies 2339, Policy Center for the New South.
    • Handle: RePEc:ocp:pbecon:pb_39-23
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