Iraq plans to allow imports of Chinese goods in RMB

On 23 Feb., 2023, the Middle East news website “Al-Monitor”,the Global Times and other media reported that Iraq plans to settle its importtrade with China in RMB.

Iraq’s central bank issued a statement saying it wouldallow trade from China to be settled directly in RMB. Iraq has laid down twooptions for RMB transactions with China: one is to increase its RMB reservesthrough RMB accounts opened by its banks in China; the other is to increase theUS dollar reserves of the country’s banks through the accounts of the centralbank in JPMorgan and DBS Bank in Singapore for the exchange of RMB. A JPMorganspokesman did not comment further on the matter.

Saleh, an economic adviser to the Iraqi government,said that the new measures of the Central Bank of Iraq apply to private sectorimport trade, excluding oil trade.

Media reports say Iraq’s new moves, aimed atstabilizing the Iraqi dinar, which has depreciated against the dollar in recentmonths, are part of measures to obtain foreign exchange. Iraq is currentlyfacing a shortage of dollars, partly due to the Federal Reserve’s continuedinterest rate hikes and tightening restrictions on the circulation of dollars,causing the fall in value of the Iraqi dinar against the US dollar.

The Global Times commented that this incident showsthat the international status and influence of the RMB have been furtherenhanced. Some analysts believe that Iraq’s import amount from China isrelatively small, so the settlement in RMB cannot have a significant impact onthe overall degree of RMB internationalization, which needs larger economies toparticipate.

According to data from the Ministry of Commerce of thePeople’s Republic of China, in 2021, China’s bilateral trade with Iraq was USD37.3billion, a year-on-year increase of 23.4%, of which Chinese exports were USD10.69billion, down 2.1% year-on-year, and Chinese imports were USD26.61 billion, up 37.8%year-on-year.

Recent discussions on the internationalization of the RMBinclude a memorandum of cooperation with Brazil. According to Xinhua NewsAgency, the People’s Bank of China announced on 7 Feb., 2023 that it recentlysigned a memorandum of cooperation with the Central Bank of Brazil to establisha RMB settlement arrangement in Brazil.

The relevant person in charge of the People’s Bank ofChina said that the establishment of the RMB settlement arrangement in Brazilwill be conducive to enterprises and financial institutions in China and Brazilusing RMB for cross-border transactions, and further promote bilateral tradeand investment facilitation.