As the United States escalates its trade dispute with Brazil by labeling the Pix instant payment system an “unfair practice,” China’s central bank has moved in the opposite direction, signaling concrete interest in a bilateral partnership on cross-border payments that could reduce reliance on the U.S. dollar.
A note published this month on the website of the People’s Bank of China (PBoC) summarized the outcomes of the 4th meeting of the China-Brazil Strategic Financial Cooperation Working Group, held in Shanghai on June 9. The session included the presence of Gabriel Galípolo, president of Brazil’s Central Bank (BCB), and covered advances in local-currency trade, investment, and cross-border payment mechanisms.
US Investigation Targets Pix
The Chinese overture comes amid a U.S. trade investigation that has recommended imposing 25% tariffs on Brazilian exports. American authorities characterize Pix — a state-regulated, real-time payment platform launched by the BCB in 2020 — as an “unfair” Brazilian policy that disadvantages U.S. payment providers. According to the U.S. government, the BCB’s dual role as both regulator and operator of Pix creates a conflict of interest that undermines foreign competitors.
The complaint has resonated with U.S. card networks and stablecoin operators, who argue that Pix’s zero-fee structure and ubiquity in Brazil distort the competitive landscape. But Brazilian officials say the White House harbors a deeper concern: the potential for direct links between real-time payment systems across different countries could erode the dollar’s dominance in global trade settlement. Today, the vast majority of cross-border transactions pass through the U.S. currency.
China’s Proposal: Building on the SML Model
The PBoC communiqué specifically highlighted discussions around the Local Currency Payment System (SML) — a Brazilian-administered mechanism that allows exporters and importers in Mercosur countries (Argentina, Paraguay, and Uruguay) to settle transactions in their own currencies, bypassing an intermediary like the dollar.
“Ambas as partes também discutiram o potencial do SML e da cooperação em sistemas de pagamento, a fim de fornecer serviços de pagamento e compensação seguros e eficientes para o comércio bilateral,” the communiqué stated, according to the official translation.
Under the SML, the exchange rate is determined by the ratio between the BCB’s reference rate for the real against the dollar and the reference rate published by the partner central bank. The BCB acts only as an intermediary, not as a market maker.
While still at a preliminary stage — with no model yet defined — the China-Brazil talks could lead to a mechanism similar to the SML tailored for bilateral trade. China already maintains comparable arrangements with other countries as part of its broader strategy to internationalize the renminbi and streamline cross-border commerce.
Beyond SML: Pix Integration on the Table
China is not limiting its interest to the SML framework. According to Brazilian sources, the PBoC has previously expressed a desire to integrate its own instant payment infrastructure with Pix, the Brazilian system that processes more than 4 billion transactions monthly. The demand is not unique to Beijing; the BCB has held exploratory conversations with other jurisdictions as part of a global push to lower the cost and complexity of international transfers.
However, Brazilian authorities caution that the issue is not a current priority. The BCB is focused on strengthening Pix’s security architecture amid a surge in fraud and faces budget constraints and staffing shortages. Technical and governance hurdles also loom large: any cross-border connection would require agreement on currency conversion mechanics, settlement finality, regulatory oversight, and whether transactions would still route through the dollar or settle directly between local currencies.
Geopolitical Stakes
Analysts say the diverging approaches of Washington and Beijing reflect broader tensions over the architecture of global finance. While the U.S. seeks to contain what it sees as state-driven distortions in Brazil’s payments market, China is leveraging financial technology as a diplomatic and commercial tool — one that could, over time, chip away at the dollar’s hegemony in trade settlement.
For now, the China-Brazil payment partnership remains in the conceptual phase. But the Shanghai communiqué signals that both sides see tangible benefits in reducing frictions for the $150 billion bilateral trade relationship — and in doing so, potentially reshaping how value moves across borders in the 21st century.
Source: InfoMoney
