Iraq to Pay Yuan in Trade Transactions with China

According to Reuters, this is the first time Iraq plans to accept yuan settlement, and the move is in response to a dollar shortage in local markets. Iraqi imports from China have been financed in USD only.

The move is also a sign of the internationalization of yuan. As China gradually opens its markets, some countries are looking to diversify their currency exposures.

In an announcement, the Central Bank of Iraq said it may raise the balances of some Iraqi banks as part of the plan, provided they have yuan accounts with Chinese banks.

The central bank may also increase the balances of local banks through its accounts with JPMorgan and Development Bank of Singapore (DBS).

The former depends on the amount of yuan reserves the central bank has, while the latter would use the banks' dollar reserves at JPMorgan and DBS. Mudhir Salih, an economic adviser to the government, explained that the two banks will convert the dollars into yuan and eventually pay the beneficiary in China.

(Source: Reuters)