The Ministry of Foreign Affairs responds to media reports that China has suspended the China-Argentina currency swap arrangement, stating, "We insist on mutually beneficial cooperation with Argentina on the basis of equality and mutual benefit." What does this imply?

On December 20th, Foreign Ministry Spokesperson Wang Wenbin presided over the regular press conference. A Reuters reporter asked about media reports that China has suspended the currency swap arrangement of approximately $6.5 billion between the central banks of China and Argentina. Can China confirm this? “Regarding the relevant issue you mentioned, we suggest inquiring with the competent authoritiess. Here, we would like to reiterate our consistent principles: we insist on mutually beneficial cooperation with Argentina on the basis of equality and mutual benefit,” Wang Wenbin stated. Has China suspended its currency swap arrangement with Argentina? Foreign Ministry responds - The Paper.

First, let’s address some misconceptions about currency swaps. Due to the name, some readers may wonder if this means that China is exchanging the renminbi for depreciating pesos at this time, while Argentina holds Chinese renminbi. Wouldn’t that mean China is willingly taking on a losing position?

In reality, this is not the case. Currency swap (also known as “currency swap agreements”) typically refers to a market transaction in which two trading parties holding different currencies exchange equivalent amounts of currency at the beginning of a period and then exchange back their respective domestic currencies at the end of the period, along with paying each other corresponding interest. The prior agreement between the two parties is called a currency swap agreement. Currency swap agreements have a fixed term, and upon maturity, both parties are obligated to repay the principal and interest in accordance with the original agreed-upon exchange rate and amount. In other words, a currency swap does not involve an actual exchange of currencies, as borrowing renminbi means repaying in renminbi, and there is no mention of exchange rate losses in this process. Crucially, the swap agreements signed between central banks only specify the quota and forward settlement period, without direct cash transfers to the counterpart government. So, rumors about obtaining cash for foreign exchange trading in the international market are unfounded.

Regarding the currency swap agreement between China and Argentina, it has been signed five times. As early as 2009, the People’s Bank of China and the Central Bank of Argentina signed a bilateral currency swap agreement. The swap scale was 70 billion RMB / 38 billion Argentine pesos, with an effective period of 3 years. After several extensions, on June 9th this year, the People’s Bank of China announced that it had renewed the bilateral currency swap agreement with the Central Bank of Argentina, with a swap scale of 130 billion RMB / 4.5 trillion pesos, also valid for 3 years.

The greatest risk in currency swap agreements is actually the risk of default. For example, if Argentina chooses to default at the national level on the 130 billion RMB owed to China after the third year, and the peso significantly depreciates during this period, Chinese companies may find that their purchasing power in Argentina with pesos is only 30 billion RMB. This would result in significant losses for China. It’s worth noting that Argentina is currently undergoing a shock therapy, with skyrocketing domestic inflation. The Minister of Economy has publicly stated that the peso is expected to devalue by more than 50% in the short term. Furthermore, the Argentine president is advocating for full dollarization, abandoning the peso due to its significant devaluation, and many Argentine local businesses and residents refuse to accept pesos, which could lead to the awkward situation of not being able to buy goods with pesos. In this context, it is reasonable to stop the China-Argentina currency swap arrangement.

Moreover, the most critical issue is that China-Argentina relations are at a very delicate moment. In his inaugural speech, the newly appointed President Milae emphasized that he does not intend to cooperate with China and will not promote national relations between Brazil, China, and Russia. The Foreign Minister appointed by Milae also stated that Argentina will not join the BRICS countries. Furthermore, Milae’s anti-China rhetoric during his election campaign and his complete alignment with the United States have completely disregarded the feelings of China, its current second-largest trading partner and largest agricultural export market. Argentina currently needs to expand the China-Argentina currency swap primarily because Argentina needs to use foreign exchange to purchase products that it urgently needs to import, and foreign exchange is currently in short supply in Argentina. Currently, Argentina’s foreign exchange reserves amount to only $32 billion, while its foreign debt is as high as $276.7 billion. If it can use the renminbi to purchase the items it needs, it will be able to save more US dollar reserves for its own comprehensive dollarization.

In addition, Argentina also wants to use renminbi to repay its maturing US dollar debt. For example, the Argentine Ministry of Economy announced on October 31st local time its plan to repay its maturing foreign debt and interest, totaling approximately $3.4 billion. Some of this debt will be paid using renminbi equivalent under the China-Argentina currency swap agreement. This deviates from the original intent of the swap agreement signed by both parties. Considering the current China-Argentina relationship, Argentina does not dare to default on the IMF, but will it dare to default on China?

Argentina is currently in a situation similar to someone who has borrowed from all the small loan providers and completely spent, on the verge of bankruptcy, while simultaneously cursing their bank and claiming that they absolutely won’t do any more business with them, while also applying to the bank to increase their credit card limit. Unless the bank’s managers have gone crazy, they are unlikely to agree to it.

Both parties have given each other a credit card.

China extended a credit line of 130 billion RMB to Argentina, which can be used to purchase computers, electric vehicles, clothing, socks, and more.

What about the card Argentina provided? It comes with a 4.5 trillion peso credit line, which can be used to buy minerals and food.

Now, we encounter several problems:

  1. The card China provided allows Argentina to make unrestricted purchases.

  2. Argentina is using China’s card to cash out and pay off its debts to the United States.

  3. As for the card Argentina provided, it can no longer purchase food and minerals because the companies selling these commodities only accept US dollars.

It’s like exchanging a piece of plastic for a 130 billion credit card.

The key issue is this: cashing out without making purchases, and being unable to repay. It should be frozen promptly.

What are you waiting for? I haven’t seen any bank that accepts cryptocurrency.

Indeed, the suspension of the currency swap with Argentina is a risk control measure, awaiting political commitments from Argentina’s new president, Milae. The China-Argentina currency swap agreement relies on political trust, especially given Argentina’s high-risk profile due to multiple instances of default on its debt.

In 2020, China and Argentina signed a currency swap agreement worth up to 130 billion RMB, with the renminbi accounting for over 40% of Argentina’s foreign exchange reserves at that time. In November 2022, Argentina expanded this China-Argentina currency swap agreement, increasing the amount by 5 billion US dollars. In June 2023, the two countries further extended the agreement for another three years, with a scale of 130 billion RMB in exchange for 4.5 trillion Argentine pesos.

During his presidential campaign, Milae made a series of anti-China statements, including discussions of decoupling from Chinese trade and full dollarization. Since taking office, he has actively devalued the Argentine peso by 54%, causing a loss of liquidity in the currency. Milae’s visit to the United States was intended to secure economic assistance from Biden to support comprehensive dollarization and economic reform, but Biden did not meet with Milae. Milae then turned around and requested an expansion of the currency swap agreement with China, but China’s stance is to pause due to the risk of Argentina’s national bankruptcy. Foreign exchange reserves have decreased to a point where it’s impossible to meet maturing debts, and the previous repayment of International Monetary Fund debts was made possible through the China-Argentina currency swap agreement. With a significant amount of debt due for repayment nearing the year-end, the Biden administration has clearly shown no interest in supporting Argentina’s dollarization and economic reform, leaving China as the primary option.

China and Argentina have highly complementary trade relations, with China primarily exporting industrial products and importing agricultural products such as soybeans and beef. In 2022, China’s total exports to Argentina were valued at $12.769 billion, a year-on-year increase of 19.6%. China’s total imports from Argentina amounted to $8.593 billion, showing a year-on-year increase of 20.6%. The trade surplus between China and Argentina in 2022 was $4.175 billion. China is very willing to develop trade with Argentina, with the precondition being the establishment of political trust. If Milae visits China and provides political commitments, the China-Argentina currency swap agreement will continue. Establishing strategic cooperation with resource-exporting countries is a long-term strategy for China.

In 2020, the Central Bank of Argentina and the People’s Bank of China signed a currency swap agreement worth up to 130 billion RMB, making the renminbi account for over 40% of Argentina’s foreign exchange reserves.

In January this year, the Central Bank of Argentina declared that the expansion of the currency swap agreement would strengthen the existing 130 billion RMB foreign exchange reserves and provide an additional 35 billion RMB for foreign exchange market operations.

China is Argentina’s second-largest trading partner, following Brazil, and also the second-largest destination for Argentine exports.

In August, Argentina’s Minister of Economy, Masa, announced that the Argentine government would repay $2.7 billion in debt to the International Monetary Fund, with $1.7 billion to be paid using the equivalent renminbi under the China-Argentina currency swap agreement.

On October 31st, Argentina repaid nearly $2.6 billion in maturing International Monetary Fund debts, and on November 1st, paid approximately $800 million in related interest. The Argentine government used International Monetary Fund Special Drawing Rights and settled in renminbi to fulfill this debt.

Former Argentine President Fernández had a good relationship with China, and China has consistently supported Argentina.

This year, the Argentine peso has continuously depreciated, dropping nearly 50% from the beginning of the year to November at the official exchange rate. Upon taking office, the new President Milae caused another 54% devaluation, with the peso’s exchange rate against the US dollar exceeding 800 pesos.

Following the significant devaluation of its currency, 11 provinces in Argentina entered a state of economic emergency.

On the 18th, Milae announced that the Argentine energy sector was in a state of emergency and ordered the Energy Secretariat to begin revising electricity and natural gas rate tables. They will consider allowing energy prices to fluctuate based on market levels to “ensure continuous supply.”

This marks the first step in the Argentine government’s plan to reduce public utility subsidies, leading to a significant increase in electricity and gas prices.

Raising energy costs could further drive the already high inflation rate of nearly 200%, directly pushing more Argentines into poverty. Currently, 40% of the Argentine population lives below the poverty line.

The Milae government intends to use “shock therapy” to address Argentina’s persistently high inflation rate. These measures have placed the Argentine economy in a precarious position, and the future remains uncertain, with the political novice relying on Western economics to perform major surgery on Argentina.

On December 12th, the Argentine newspaper “Nacional” reported that President Milae sent a letter to the Chinese side, requesting Chinese support and expedited expansion of the currency swap agreement reached with the previous government.

During his campaign, Milae staunchly asserted that his government would not have any dealings with “communist countries.”

The Argentine government needs to rebuild its foreign exchange reserves to handle trade and future debt repayments. Milae is considering seeking China’s support.

Given the current situation in Argentina, Milae’s “shock therapy” will determine the country’s future, and most experts are not optimistic about these tumultuous reforms. China, of course, also needs to consider Argentina’s economic situation in the future—how to repay old debts after paying off old debts with China’s money.

At the very least, both sides need to communicate or provide guarantees.

Stopping is normal.

Contrary to what many people may think, currency swap does not involve exchanging physical cash. Even if it’s a large sum like 2 million RMB, can you carry it all by yourself?

If currency swap were about exchanging physical cash, imagine the size of the ship needed to transport all those pesos across!


So, this swap agreement can be seen as a mutual loan agreement. Argentina borrows RMB to repay RMB, and China borrows pesos to repay pesos.

This means that whoever devalues their currency will incur losses.

For example, if 10 RMB were exchanged for 100 pesos, and I used 100 pesos to buy a steak, and the next day, that steak was worth 200 pesos. However, when we repay, we still owe Argentina 100 pesos.

Who loses?

So, why can’t we continue with the swap after five times? It’s because Argentina simply doesn’t have the ability to repay!

If neither party repays, we would incur significant losses. Their peso becomes worthless, and we can hardly spend it. They take the RMB to repay their U.S. debt.

In the end, they may default.

And then, we become the scapegoats.

As for carrying 23 kilograms of RMB on one’s back and running, all I can say is, thank you for showing me the power of money.

Currency swap is not about exchanging RMB for pesos. It’s about China and Argentina mutually extending credit to each other.

For example, during the Ming Dynasty era, my family grows rice, and we harvest it in October. Your family grows wheat, and you harvest it in March. When I have rice, your wheat is nearly gone, and when you have wheat, my rice is running out. We can never trade with each other.

In a normal year, we can use Ming Baochao to buy from each other. However, the Baochao devalues too quickly. In October, I took ten thousand guan of Baochao from you (to buy rice). In March, when I buy wheat from you, the Baochao is only worth a thousand guan. Nine thousand guan of its value has been taken away by the Ming government.

So, in June, we agree that one jin of rice can be exchanged for one jin of wheat, valid for one year. In October, I give you ten jin of rice, and in March, you give me ten jin of wheat. Then, we settle the accounts in June of the next year.

What if my rice price goes up, and your wheat price goes down? It’s still the same. Next June, you give me ten jin of rice, and I give you ten jin of wheat. You may say that my ten jin of rice is now worth twenty jin of wheat, and you’re at a loss. Well, sorry, that’s because you didn’t manage your wheat prices well.

So, currency swap using our own currencies isolates us from being harvested by the U.S. And the one whose currency devalues quickly ends up being the loser. This forces both parties to stabilize their currency values.

However, why hasn’t China signed this kind of agreement with Argentina? Going back to the rice and wheat example, if you don’t give me back ten jin of rice the next year, holding ten jin of wheat won’t help me. I’m the one at a loss.

Therefore, suspending the currency swap with Argentina is due to a lack of trust in Argentina’s ability to repay the RMB. Extending credit to a party that is predictably not creditworthy would be foolish.

Finally found a reason to stop.

Technical bureaucrats have had a tough time these past few years, wiping without toilet paper.

The foundation of the China-Argentina currency swap is de-dollarization.

With Argentina’s new currency policy of national currency dollarization, the foundation for the swap no longer exists, so of course, it can be suspended.

The peso’s value changes daily, and using resources to exchange for it is almost futile.

We’re not wealthy landlords; anyone can make a profit.

This question about Argentina has been addressed in two previous answers that you all have seen. The central idea is that Argentina ultimately needs foreign investment to kickstart its economy. The question is, who will be the white knight to do this?

Actually, Argentina’s female foreign minister has openly stated that Argentina needs China’s help! Does China have an obligation to help Argentina? Definitely not. Milae has also publicly expressed his hope for us to increase currency swaps. But there are no specific conditions mentioned. Moreover, there have been anti-Milae protests in many parts of Argentina, which could lead to even greater unrest and political crises that no one can accurately predict.

In the current situation, perhaps suspending currency swaps is a viable option for China. But it’s no different from pulling the rug out from under Argentina! It means Argentina is being abandoned by the world. In fact, I have a suggestion for Argentina, which is to 1. Mortgage all of Argentina’s state-owned enterprises and public utilities to China in exchange for Chinese funds. 2. Actively request Chinese troops to protect the assets mortgaged to China. 3. Grant visa-free access to China, allowing Chinese citizens to enter and exit Argentina freely. 4. Allow Chinese citizens to freely purchase Argentine land and real estate. 5. Make Chinese a compulsory subject in Argentine public schools. 6. … and so on. Let me dig up the Treaty of Masanjia for reference. Hahaha!

To understand the reason for the suspension, let’s review the previous currency swap agreement between China and Argentina.

According to the agreement: China provided 130 billion yuan to Argentina for the repayment of its debt to the International Monetary Fund (IMF); Argentina was supposed to repay this yuan in equivalent pesos after the debt maturity.

The purpose of signing the swap agreement was to promote cooperation between China and Argentina in various fields. However, with the change of the Argentine government and the unconventional approach of the new president, the agreement has been disrupted.

Given the current situation, Argentina may not repay this money, or even if they do, they might delay the debt repayment, causing losses to China.

Argentina’s economic difficulties have been widely reported, so I won’t repeat them here.

What I want to say is that the new president, Milei, is an extremely right-wing economist who strongly advocates “shock therapy.”

In simple terms, this involves reducing government spending, cutting public expenditure, reducing infrastructure spending, and privatizing various industries to stimulate economic development through a “dumping baggage” approach.

Milei’s approach is even more radical, including the abolition of the central bank, the abandonment of the national currency, and the full-scale promotion of “dollarization” and other extreme measures.

If these economic policies are implemented, they will undoubtedly have a huge impact on Argentina’s society and economy, putting the entire country in a state of “shock.”

Before Milei took office, Argentina’s peso had already been depreciating due to currency devaluation and economic problems. If the chaos continues, the peso will become worthless.

Although the agreement stipulates repayment at the exchange rate at the time of signing, due to the continuous devaluation of the peso, the actual debt still shrinks.

Moreover, once the economy is truly in “shock,” Argentina won’t be able to repay the money to China, either by default or delay, but certainly not as agreed.

China provided Argentina with real and valuable yuan, hoping to promote economic exchanges between the two countries and facilitate the internationalization of the yuan. It is not an act of charity, nor does China want to be a sucker.

Considering the significant uncertainty in Argentina’s economic policy under Milei’s leadership, it’s only natural for China to try to limit its losses.

Finally, following the usual practices of the Foreign Ministry, let’s say some politically correct words and look forward to the future together!

Although the statements of the newly elected president, Milei, have created uncertainty in China-Argentina relations, considering the common interests and cooperation potential of both China and Argentina, it is expected that China-Argentina relations may still develop in a positive direction.

Argentina’s economic difficulties require it to seek support from China, a vast market and source of capital. China has also been seeking opportunities for cooperation with Argentina and other Latin American countries.

Despite recent developments not leading to a warmer China-Argentina relationship, both sides are still actively engaged in negotiations and striving for mutually beneficial cooperation.

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From our country’s perspective, in order to promote the internationalization of the Renminbi, it’s inevitable to incur some costs in the short term. The goal is to secure a larger currency space globally in the long run. However, it’s essential not to assume that these dozens of countries are staunch allies forming an anti-American alliance. Just think for yourself, what profound historical cooperation do we have with countries like Brazil and Argentina? These relationships are based on interests. When these countries are short of US dollars or money, they naturally seek China’s support. However, when the situation changes, these countries can turn their backs faster than flipping a book. At that time, they may convert Renminbi into US dollars in a heartbeat, so we must remain vigilant.

Regarding the bilateral currency swap agreement, what would be the consequences if one party’s currency experiences a significant devaluation? I kindly request an expert to provide a detailed explanation of the bilateral currency swap agreement.

Regarding the swap, let’s illustrate with an example: if China provides 1,000 WRMB to Argentina, and Argentina gives China an equivalent amount in Pesos based on the prevailing exchange rate at the time (I’m not sure if it’s the official rate, as Argentina often has a much lower unofficial rate in the black market, which China can use to acquire Pesos at a significantly lower rate than the official one), when the agreement matures, China will receive Pesos, and Argentina will repay in RMB. If the Pesos depreciate in value, China profits.

However, the key issue here is that Argentina doesn’t intend to repay, or they might simply lack the foreign currency reserves to repay the RMB, which is essentially because Argentina struggles to retain foreign currency. They receive foreign currency and spend it all. If China could immediately exchange the Pesos they hold for Argentine beef or similar goods of appropriate value, that might mitigate the loss. But the next question is, would the exchange rate negotiated be accepted by local traders? In theory, the rate China receives would be more favorable than the official rate Argentina offers its citizens. However, it’s impossible for China to offload all the Pesos in one day, exposing them to significant exchange rate risk. Hence, the biggest risk source, in reality, is holding Pesos and not being able to recover RMB. The optimal outcome in the swap is being able to retrieve RMB.

Let’s also mention an incident where Argentina defaulted in the past. When Argentina defaulted, its warships were seized by American creditors (quite ironic).

A bunch of people who were previously singing praises about the currency swap with Argentina, claiming that it would be the downfall of the U.S., why are they all keeping quiet now?

I remember that when this currency swap agreement was signed, many people came forward to explain that it was just a line of credit. Now, after borrowing in Renminbi, you have to repay in Renminbi, and whoever’s currency depreciates will suffer losses. It’s just remarkable how resilient the “leeks” are. Over the years, they’ve gone through a series of events, from P2P lending, unfinished real estate projects, to incidents like the Henan Bank, and yet there are still so many people who believe that if you owe a debt, you will definitely repay it, thinking that they’ve borrowed too little.

Under the strategy of dollarization, the Argentine peso is practically worthless, and it’s a bit shameless to want to exchange this useless paper for the highly liquid Renminbi.

The reason Argentina still hopes for a currency swap is that we have significant trade with them. Argentina’s idea is that in our trade with China, we can continue to settle in non-dollar terms, provided that the existing currency swap agreement is extended.

While after the currency swap agreement expires, Argentina needs to repay the Renminbi it originally obtained from China, along with the interest, during the contract period, China would be left holding worthless Argentine pesos while Argentina can use Renminbi for investment or as collateral. This creates a highly asymmetric situation.

If China has to accept such a currency swap agreement to facilitate trade with Argentina, it would prefer to settle in dollars rather than accept Renminbi settlement based on the currency swap agreement.

For Argentina to implement dollarization, it must have a large reserve of dollars. For an agricultural country with chronic inflation rates often exceeding 80%, it is challenging to accumulate even basic reserve assets, let alone dollar reserves. The shortage of dollars is the biggest obstacle to Argentina’s adoption of dollarization.

If Argentina continues currency swapping with China, it can use the Renminbi as collateral to borrow a certain amount of dollars overseas, thereby increasing its dollar reserves, in order to complete the task of recovering dollars from the previous devaluation of the peso. China, on the other hand, gains no significant benefit from the exchange and faces the risk of not being able to recover Renminbi at maturity (since the Renminbi has been used as collateral).

If they insist on continuing the currency swap, China should receive compensation of a certain amount. For instance, in the process of implementing dollarization, Argentina would prioritize selling high-quality assets to Chinese capital.

To secure sufficient dollars, Argentina would inevitably need to borrow at high interest rates overseas or sell high-quality domestic assets. If China can get a slice of this pie, then there might be a possibility to continue the currency swap agreement.

Given: The currency swap between China and Argentina involves the exchange of Renminbi and pesos.

Also: Argentina is planning to abandon the peso and adopt the US dollar.

It follows: The currency swap between China and Argentina is essentially the exchange of Renminbi for US dollars.

I suggest that China and the United States engage in a direct currency swap, with Renminbi exchanged for US dollars, without the need for intermediaries in Argentina to profit from the spread.

China doesn’t even want to take over the US dollar now, let alone a self-destructive junk currency that’s worse than the US dollar.

My money.

Don’t think for a moment that you can freeload.

For someone who proudly wears the words “default” on their face,

Of course, no one would lend them money.

There are just too many boomerangs.

If you don’t have the strength, don’t make a fuss.

I like the current China, it has pretty much let go of everything except starting a war. It’s a “just do it” attitude.

Whether you’re losing money or making money doesn’t matter. As long as you choose to be pro-American and anti-China, I’ll take action against you.