One minor potential benefit for China, other than the political influence, is breaking the barrier to transacting in RMB. Once importers have put the system in place for the first transaction (such as finding Argentine banks that will issue letters of credit in RMB, processing the Central Bank paperwork in RMB, etc.), then those importers will start demanding RMB for future transactions, especially since they would be easier to access than non-existent dollars.
Since a big chunk of Argentine exports (such as soy products) end up in China, both countries could then end up transacting most imports and exports in RMB rather than in USD. Once this RMB denominated trade is large enough, the Argentina Gov't could justify making the RMB of a portfolio of reserve currencies.
There are a lot of ifs in the above mechanism, but worth the bet for China who looks at the long term and for which 7B is nothing.
I follow the logic, but I'm still not sure. The USD has two advantages the RMB does not: deep capital markets and little repatriation risk. If China somehow got those same advantages, would its use as a reserve currency really grow much slower in a world where nobody had previously used the RMB for trade? (Honest question!)
One minor potential benefit for China, other than the political influence, is breaking the barrier to transacting in RMB. Once importers have put the system in place for the first transaction (such as finding Argentine banks that will issue letters of credit in RMB, processing the Central Bank paperwork in RMB, etc.), then those importers will start demanding RMB for future transactions, especially since they would be easier to access than non-existent dollars.
Since a big chunk of Argentine exports (such as soy products) end up in China, both countries could then end up transacting most imports and exports in RMB rather than in USD. Once this RMB denominated trade is large enough, the Argentina Gov't could justify making the RMB of a portfolio of reserve currencies.
There are a lot of ifs in the above mechanism, but worth the bet for China who looks at the long term and for which 7B is nothing.
I follow the logic, but I'm still not sure. The USD has two advantages the RMB does not: deep capital markets and little repatriation risk. If China somehow got those same advantages, would its use as a reserve currency really grow much slower in a world where nobody had previously used the RMB for trade? (Honest question!)