Argentine officials have gained approval to access up to 70 billion yuan ($9.89 billion) from China’s 130 billion yuan currency swap line, following a meeting in Beijing on Friday. The increased amount provides Argentina's economy minister, Sergio Massa, with more flexibility to tackle the nation's selloff of the peso and help reduce inflation that currently stands at 100%. China is looking to reduce global dependence on the US dollar, making the increased access to the swap line significant for both countries. Massa is currently in renegotiations with the International Monetary Fund over the nation's $44 Billion package in Washington.
Argentine President Alberto Fernandez placed currency controls on trading in foreign currencies last year, and the central bank is rapidly burning through its reserves in an attempt to prop up the peso. In an effort to alleviate the economic crisis and boost investor confidence, Argentina is now focusing on shoring up trade and investment partnership with China. Tapping into the currency swap line, from which Argentine can now increase its access, will enable much-needed import financing.
The increased credit line will allow policymakers in Buenos Aries to intervene further in the country's parallel exchange rate to help narrow the gap between the official rate and the freer "blue-chip" rate, which has become wild and free-floating due to government restrictions. The increased capacity in the swap line is expected to ease some liquidity concerns for Argentine policymakers and reduce the country's reliance on the US dollar.