Chinese yuan Photo:VCG

The first yuan-based cross-border commercial loan has been completed in Brazil, the Xinhua News Agency reported on Tuesday, marking another step toward the internationalization of the Chinese currency.

The loan was lent jointly by Bank of Communications (BoCOM) and Industrial and Commercial Bank of China (ICBC), which includes a 1-billion-yuan loan ($137 million) from BoCOM and a 300-million-yuan loan by ICBC.

The funds will be used for the operation of the Sao Simao Hydroelectric Power Station in Brazil, with a term of three years.

Given the current interest rates in Brazil and the costs of currency conversion, using the yuan is expected to save more than 60 million yuan of financing cost, according to Xinhua.

Issuing yuan-based loans in Brazil represents a high level of internationalization of the Chinese currency, and flourishing bilateral trade has created a yuan cash pool in Brazil, which is a precondition for issuing such loans, Cong Yi, a professor from the Tianjin School of Administration, told the Global Times on Wednesday.

At the end of 2022, the yuan surpassed the euro to become the second-largest currency in Brazil's foreign reserves, with a 5.37 percent share, according to the Central Bank of Brazil.

China and Brazil have deepened cooperation in bilateral trade, with efforts to promote local currency trade. The two countries signed a memorandum of understanding on cooperation to promote local currency trade in April, and completed a commercial deal using a local currency transaction for the first time on October 4, Xinhua reported.

The yuan is on a stable path of internationalization. In September, its share in international payments hit a record of 3.71 percent, and it retained its position as the fifth most active currency for global payments, according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

Total payments in yuan were up 2.77 percent by value compared with August, SWIFT data revealed.

The yuan is now the world's fifth most important currency for reserves, payments and trading, and the world's third-largest currency for trade financing.

On Monday, a yuan clearing bank opened in Laos to help create a fast, safe and economical cross-border settlement channel between Laos and China, Xinhua reported.

Operated by ICBC, the bank is aimed at helping enterprises and financial institutions carry out yuan transactions between China and Laos.