Shanghai Cooperation Organisation (SCO) and Global South strategic cooperation

China is not looking for a bff in Turkey. It's just looking for a country that it can have prosperous trade relationships with, to help its position in various BRI projects and in MENA. Turkey will need to leave NATO and buy Chinese weapons if it wants to get closer to China.

Anyhow, a couple of things to point out given the upcoming BRICS summit. There was the bloomberg article about 19 countries looking to enter BRICS.

a few things to think about. here we have Argentina meeting with Brazil & China to look for entry into BRICS and talking up de-dollarization. As we know, Argentina is having real inflation issues and running out of USD
South American countries really hurting and with Brazil's guiding hand, this can pull more countries in Latam into de-dollarization effort

Same with South Africa in its relationship with sub-sahara Africa
how to have BRICS advance economic interests of these countries, so they don't have to goto IMF or world bank

you probably need Saudi entry here in both BRICS and SCO since numerous MENA countries want to join BRICS

This david goldman article just shows how much less China is dependent on the US market
look at that, developed countries now receive less export from China than the global south.

Central Asia + Turkey & Iran now almost 1/3 the export volume of ASEAN countries.
China needs to continue to cultivate these relationships like it has with Russia

$24B export to Russia in Q1 (including $9B in March)
import almost $30B

Again, export number still has room to grow as more cars and machines from China replace European ones. And we want the same to play out with Iran and Turkey, although it's hard to see same level of market place dominance there.

tphuang said:

a few things to think about. here we have Argentina meeting with Brazil & China to look for entry into BRICS and talking up de-dollarization. As we know, Argentina is having real inflation issues and running out of USD

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Argentine's case is difficult. Why would anyone hold Argentinian currency which just now had a 100% inflation rate?

More ways that China is getting involved in global south
Another hospital in Sri Lanka among quite a list of projects
here is news about the logistical hub that China helped SL in setting up in Colombo recently

CPPE helped Uganda and Tanzania to build an oil pipeline between the two countries that just entered into service

We have Shanxi CIG signing contract for construction of Dam in Armenia

Winning railway construction contract in Bahia, Brazil. Bahia is planned location of BYD plant

PowerChina building Sierra Leona Bridge

PowerChina also getting into Serbian renewable power

So, what happened today with Argentina is quite interesting. Back on the weekend, rumors came out that Argentina was running out of USD and was in trouble. Maybe they had to borrow more money from IMF. So we saw Argentina looking to get into BRICS and work with NDB

Makes since since IMF just chokes and impoverishes a nation.

There is not a lot of choice left for Argentina really, so the news came out today that Argentina will buy goods from China in RMB
now since China is running a major surplus against Argentina, the RMB will have to come from the currency swap that China has done with Argentina earlier this year. Also keep in mind the amount we are talking about here is almost as all of Argentina's monthly import from China.

Business chambers that were consulted by Ámbito said that foreign trade in yuan with China streamlined operations in the past few days with “massive approvals” of import authorizations (Siras, for their name in Spanish).

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The yuan available to the Central Bank to carry out this measure come from the fifth disbursement of a currency swap with China — the announcement means that exchange rate operations have been authorized for the US$ 5 billion from the People’s Bank of China.

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For that to happen, the business must be conducted with China and accepted by suppliers because they have to emit invoices in that currency. According to the economy minister, the measure will speed up imports because while most authorizations take 180 days, “with yuan they take 90 days.”

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keep in mind that the currency swap loan will run out in a few months if Argentina doesn't turn things around somehow. I like that they are doing the trading in RMB, but at some point, currency swap just means China will end up holding worthless Argentinian Pesos. So if you are China, the question is what concession you can get out of Argentina.

Well for one, Argentina better be committed to the nuclear reactor project

A possibility will be China owning large parts of local energy sector like it has in Peru
Another would be increasing ownership into Lithium sector. Others would be copper and gold mining

Of course, more military deals would make sense. Basically, if we are going to give you money to buy stuff from us, you better buy some stuff we want you to buy. Will need to be some stuff that strengthens relationship for the longer term.

So aside from Argentina, I would be curious who else ends up doing all its import from China in RMB because it runs out of USD.

Argentina can also issue RMB bonds.

tphuang said:

For that to happen, the business must be conducted with China and accepted by suppliers because they have to emit invoices in that currency. According to the economy minister, the measure will speed up imports because while most authorizations take 180 days, “with yuan they take 90 days.”

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Why is the authorization of import of Chinese goods required? And by whom?

tphuang said:

Of course, more military deals would make sense. Basically, if we are going to give you money to buy stuff from us, you better buy some stuff we want you to buy. Will need to be some stuff that strengthens relationship for the longer term.

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I think this is a great point. Argentina currency is not very useful for China, but it can be made up by their choice of what goods to buy.

Argentinian football team will advertise Chinese brands, sell natural resources for RMB, induct Chinese weapons into its military, run FONOPS in the Malvinas, etc.

vincent said:

Argentina can also issue RMB bonds.

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It can, but who will subscribe to them? Reminder that Argentina has in total, defaulted nine times. Three times if we only count in the past two decades.

Anyone buying Argentinian bonds might as well as donate that money to a charity.

tphuang said:

keep in mind that the currency swap loan will run out in a few months if Argentina doesn't turn things around somehow. I like that they are doing the trading in RMB, but at some point, currency swap just means China will end up holding worthless Argentinian Pesos. So if you are China, the question is what concession you can get out of Argentina.

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The currency swap is a lot of money. And with China holding Argentinian pesos (lets call them, "zeros"), that currency is basically worthless given the state of the Argentinian economy

Handing to Argentine RMB in exchange for Argentinian Pesos means that China is throwing its money to the fire. The question is what Argentine has promised to China to get this big favour.

Strategic sector, and tech/military imports from China would be good. But obviously that's a temporary solution, China won't keep subsiding Argentine till the end of time. They have to sort out their economic and trade issues first. That China deal is useful for Argentine because it eases their problems and gives them some extra time to solve them

Overbom said:

It can, but who will subscribe to them? Reminder that Argentina has in total, defaulted nine times. Three times if we only count in the past two decades.

Anyone buying Argentinian bonds might as well as donate that money to a charity.

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Not necessarily if the bonds are tie to money generating projects like lithium mines.
I’m not familiar with Argentina’s issues. Before 2002 Argentina’s peso was pegged to USD. My understanding is the government kept the peg for too long and didn’t let the peso to float (devalued). It was forced to let go of the peg and caused huge problems with the economy. Financial vultures from the West also made things much worst.

Overbom said:

The currency swap is a lot of money. And with China holding Argentinian pesos (lets call them, "zeros"), that currency is basically worthless given the state of the Argentinian economy

Handing to Argentine RMB in exchange for Argentinian Pesos means that China is throwing its money to the fire. The question is what Argentine has promised to China to get this big favour.

Strategic sector, and tech/military imports from China would be good. But obviously that's a temporary solution, China won't keep subsiding Argentine till the end of time. They have to sort out their economic and trade issues first. That China deal is useful for Argentine because it eases their problems and gives them some extra time to solve them

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At the end of the day People’s Bank of China can create RMB out of thin air and give them to other countries. The Chinese government can use the money to build up other countries’ economies and strengthen China’s relationship with them while keeping Chinese people employed.