China-Brazil relationship Photo: VCG

China and Brazil will see a strong boost in their economic and trade ties after the use of the yuan as an alternative to the US dollar and the euro, Henry Osvald, president of the Brazilian Association for Industry, Commerce and Innovation in China (BraCham), said, extending his expectations for deepening cooperation between the two countries.

This remark came ahead of Brazilian President Luiz Inácio Lula da Silva's visit to China. Lula's visit, with a record delegation, is expected to inject new impetus into bilateral cooperation and boost confidence among the business community in an economic recovery.

Of all possible areas for deepening cooperation, local currency settlement is among those that have received the most attention in relation to his visit due to its possible use to drive economic and trade while helping the largest Latin American country to reduce risks from the US dollar.

Speaking with the Global Times in an exclusive interview on Monday, Osvald said that cooperation between China and Brazil over using yuan clearance in economic and trade affairs is very important as "hedging in Brazil is quite expensive and Chinese companies add an average of three percent to cover exchange rate fluctuations."

Earlier this year, China and Brazil signed a memorandum of understanding to establish a yuan clearing arrangement, which will be conducive for promoting bilateral trade and facilitating investment, the Chinese Foreign Ministry said on March 30.

The Brazilian branch of Industrial and Commercial Bank of China will be the local yuan clearing bank in Brazil.

Experts said that more cooperation could take shape against the backdrop of the presidential visit. 

"This comes at a very important moment as the US dollar is not stable and it is depreciating considerably," Osvald said, noting he is confident that the use of yuan settlements will further boost trade between China and Brazil.

"Brazil is the only country in Latin America that has a bank established in China, and there are already several Chinese banks established in Brazil - this will help economic and trade ties and strengthen the yuan as an alternative to the US dollar and the euro," Osvald said.

President Lula's visit is highly anticipated among the business community as adding momentum to bilateral trade and investment.

Osvald said that Brazilian companies in China are all very confident - not only in the new Brazilian government, which has strong connections with China - but also for the needs of the economic recovery.

"With a global recession and polarized world, we are sure that China will expand its investments in Latin American and Brazil is one of the key countries," he said.

China has maintained its role as Brazil's largest trading partner for 14 consecutive years and is Brazil's largest consumer in a wide range of daily items including soybeans and chicken. Mining and energy are also among the top traded goods between the two countries.

"We understand China will increase purchasing of commodities and raw material from Brazil such as minerals, cellulose, oil, grains and meat, but we hope we can expand it to more value-added products, since Brazil also needs to generate more jobs and increase tax income, and for that, being able to add more value to the supply chain is a key factor," Osvald said.

As a person who has lived in China for nearly two decades, Osvald said he saw how China has significantly changed with the heavy investment in education, infrastructure, technology and the environment, expressing his hopes for more cooperation in these fields with Brazil.

Experts said that the two countries could also engage in green development cooperation, where the potential is huge.