The Australian Minister Julia Gillard has announced that China and Australia have finished a deal according to which their currencies will be directly converted. Australia is the third country in the world which will have such an agreement with China. The agreement will supposedly will cut the costs for Australia companies that want to do Business in China which is Australia’s biggest trading partner. At present only US dollar and the Japanese Yen are directly exchangeable with the Yuan. This means that after the deal, Australian investors and traders will no more need to convert their currency into United States dollars when trading with China.
“This is a huge advantage for Australia,” Ms. Gillard told reporters in Shanghai, flanked by executives from some of Australia’s biggest banks. “It’s a strategic step forward for Australia as we add to our economic engagement with China.” In addition to that Mrs Gillard said that People’s Bank of China has already approved the licenses of Westpac Banking Corp and Australia & New Zealand Bank to act as market makers for direct trading of the currencies.
Some analysts think that the new agreement will need a time in order to shape the transactions between the two countries. The Australia’s main exports to Chine include commodities such as iron ore and coal. They are usually priced in United States Dollars. At the same time Australian companies are adapting the Yuan, but very slowly. Nevertheless they sharply increased the use of the Chinese currency for international transactions, according to the Society for Worldwide Interbank Financial Telecommunication, a global payments system.
The close economic relationship with China has helped shield Australia from the turmoil in Europe and the fragility of the U.S. recovery. About 20% of the nation’s exports go to China, with two-way goods-and-services trade between the countries valued at 128 billion Australian dollars (US$133 billion) for the 2011-12 financial year.