Bilateral Currency Swap Agreements and Local Currency Trade Settlements

nCa Report

The practice of countries engaging in mutual trade and settlements using their own local currencies, often facilitated by bilateral currency swap agreements (BSAs), has gained momentum as part of broader dedollarization efforts.

These arrangements allow nations to bypass third-party currencies like the US dollar or euro, reducing transaction costs, foreign exchange risks, and dependence on global financial systems dominated by Western currencies.

While BSAs provide the liquidity framework, actual settlements occur through mechanisms like direct payment systems or cross-border clearing.

China’s People’s Bank of China (PBC) has been a pioneer, establishing BSAs with over 40 countries since 2008 to promote renminbi (RMB) internationalization and enable local currency trade.

This trend is particularly prominent among BRICS nations (Brazil, Russia, India, China, South Africa) and emerging markets seeking to insulate against sanctions and economic volatility.

Key Bilateral Arrangements

Below is a compilation of notable bilateral arrangements focused on local currency trade settlements. Data includes partner countries, establishment or renewal years, swap facility amounts (where available), and estimated annual volumes of settlements in local currencies (based on reported usage; note that volumes fluctuate and are not always publicly disclosed in detail). These are drawn from central bank reports, think tanks, and economic analyses.

Not all BSAs are actively used for trade settlements—many serve as liquidity backstops—but those listed have documented trade applications.

Country Pair	Establishment/Renewal Year	Swap Facility Amount	Annual Settlement Volume (Approximate, Latest Available)	Notes
China-Russia	2011 (renewed multiple times, e.g., 2023)	RMB 150 billion (~$24 billion)	~$200-240 billion (90-95% of bilateral trade in yuan and rubles in 2024-2025) (up to 99% according to Politics Today)	High usage due to sanctions; includes a $400 billion 30-year gas deal settled in local currencies since 2022.
China-India	No direct BSA, but local currency framework since 2022	N/A (via payment systems)	Perhaps ~$60-65 billion (90% of bilateral trade in rupees and yuan in 2025) (exact figures not available)	Accelerated post-Russia-Ukraine conflict; India-Russia trade also at 90% local currencies, reaching $65 billion in 2024.
China-Brazil	2012 (renewed 2025)	RMB 190 billion (~$30 billion)	~$150 billion (over 50% of bilateral trade in yuan and reais in 2023-2024)	Brazil uses yuan for ~48% of imports from China; part of BRICS dedollarization push.
India-Russia	2022 (framework agreement)	N/A	~$68-72 billion (90% in rupees and rubles in 2024)	Surged 33% year-over-year; targets $100 billion by 2030.
India-UAE	2023 (memorandum)	N/A	~$3-5 billion (initial oil and trade deals in rupees and dirhams in 2024)	First oil purchase by India in rupees; bilateral trade ~$85 billion total.
China-Argentina	2009 (renewed 2023)	RMB 130 billion (~$18 billion)	~$10-20 billion (used for reserves and trade amid dollar shortages)	Drawn multiple times for import financing; 2023 draw to repay IMF debt.
China-Saudi Arabia	2024 (signed November 2023)	RMB 50 billion (~$7 billion)	Emerging (aims for $50-100 billion bilateral trade in yuan by 2026)	Focus on oil trade; Saudi considering yuan for oil sales.
China-Indonesia	2009 (renewed 2023)	RMB 100 billion (~$16 billion)	~$2.5-3 billion (10% growth in local settlements in 2022)	Reduced USD exposure by $2.53 billion in 2021.
China-South Korea	2008 (renewed 2023)	RMB 180 billion (~$29 billion)	~$50-60 billion (significant portion of $300 billion+ trade in won and yuan)	Early adopter; drawn for trade financing.
Russia-Iran	2023 (framework)	N/A	~$10-15 billion (majority in rubles and rials)	Part of sanctions evasion; linked to North-South corridor.

Other notable China-led BSAs with trade settlement potential include those with Malaysia (2009, RMB 80 billion), Thailand (2011, RMB 70 billion), Pakistan (2011), UAE (2012), Turkey (2012), Australia (2012), and New Zealand (2011), among others up to 41 partners. Overall, China’s cross-border RMB settlements for goods reached ~$154.5 billion in June 2025 alone, representing about half of its total foreign trade.

Among Arab countries, while BSAs exist (e.g., UAE-China since 2012), specific trade settlement volumes are limited in public data. Efforts are underway to expand intra-Arab swaps, but no comprehensive volumes were detailed in reviewed sources.

Is the Trend Growing?

Yes, the trend toward local currency settlements is accelerating, driven by geopolitical tensions, sanctions, and economic diversification.

Since 2022, dedollarization has intensified, with emerging markets increasing local currency use in cross-border payments by 20-30% annually. BRICS countries are at the forefront, settling 85% of intra-group transactions in local currencies by 2025, up from near zero a decade ago. Asia leads, with countries like Indonesia, Thailand, and Malaysia expanding frameworks to cut USD reliance. Global South nations, including those in North Africa (e.g., Egypt, Algeria), are receptive to China’s dedollarization push. Reports indicate 24-40 countries are actively shifting or considering it, with BRICS expansion (now including Egypt, Ethiopia, Iran, UAE) amplifying the momentum.

Countries Considering or Likely to Switch

Iran, Venezuela, and North Korea: Already under sanctions, they are expanding local currency trade with Russia and China.
Egypt, South Africa, and Ethiopia: As new BRICS members, exploring intra-BRICS local settlements.
Indonesia, Thailand, Malaysia: Deepening ASEAN-China ties for commodity trade in local currencies.
Saudi Arabia, UAE: Shifting oil trade to yuan; UAE-India deal as a model.
Pakistan, Turkey, Algeria: Negotiating or renewing BSAs with China for trade resilience.
Kenya, Nigeria (Africa): Considering amid dollar shortages.

This shift could reshape global finance, potentially eroding USD dominance in commodities and reserves by 2030. /// nCa, 26 January 2026

Sources