After years of providing loans to Latin American nations, China’s current strategy is to penetrate the region’s banking system to expand its influence and reduce the use of the U.S. dollar.
Through financial diplomacy, the expansion of the China International Payment System (CIPS), and the spread of its own credit cards and payment instruments, Beijing is consolidating its soft financial power in Latin America. The associated risks include a growing strategic dependence on Beijing and reduced transparency in the financial system.
“China is undergoing a process of profound slowdown, marked by a systemic real estate crisis, stock markets under pressure, record capital outflows, declining demographics, and stagnant productivity. Building an international financial system on the Chinese economy, which does not publish credible data and censors bad news, is not only risky, it’s reckless,” Brazilian economist VanDyck Silveira, director of strategy and global expansion and professor at the Catholic University of Murcia (UCAM), based in Spain, told Diálogo.
The CIPS risk factor
Brazil was one of the first countries to adopt the CIPS, the dollar-free alternative to SWIFT, launched in 2015 by the People’s Bank of China (PBC). This system is part of a broader effort by Beijing to facilitate international transactions in non-dollar currencies, particularly the renminbi (the official name of the Chinese currency, which uses the yuan as its unit of measurement).
“Joining CIPS does not mean de-dollarization but rather re-mortgaging the risk. If the real estate bubble, demographics, and capital flight push China toward a harder adjustment, pressure to devalue the yuan will increase, and whoever is trapped in the Chinese system will pay the bill in terms of trade, reserves, and volatility,” Silveira says.
In 2023, BOCOM-BBM, one of Brazil’s oldest banks, founded in 1858 and wholly controlled by the Bank of Communications of China (BOCOM) since 2021, joined the CIPS system. Brazilian bank Master had also announced its intention to join CIPS in July 2025, but its recent liquidation by the Brazilian Central Bank, due to serious irregularities, effectively prevented its entry.
“The risk of opacity is high because you end up depending on a system where the rules change by political decision and statistics are ‘optimized’ to serve the Communist Party’s narrative,” Silveira says.
UnionPay vulnerability
China UnionPay, China’s leading payment card operator, was expected to be operational in Brazil in late 2025 thanks to a partnership with a local fintech company. UnionPay is a branch of the Chinese financial system and operates with the approval of the PBC. In recent years, it has expanded its presence in Latin America, being accepted in much of the retail trade in countries such as Brazil, Ecuador, and Peru.
“The more payments made in yuan, the more consumers and businesses will be exposed to the risk of a managed currency devaluation, something China has done several times in the past to support its exporters in times of economic stress,” Silveira said.
According to the expert, if Beijing wanted to punish a Latin American country, for example for recognizing Taiwan, it could interrupt or drastically limit payment flows and cross-border transactions, as well as leverage the economic information associated with such operations.
“In a system where there is no clear separation between the state, the party, regulatory authorities, and large financial technology companies, data on consumption, location, and spending abroad are, in practice, economic and political intelligence data used to monitor businesspeople, journalists, politicians, and opinion leaders,” says Silveira.
Financial diplomacy and dependency
Visits and exchanges by Chinese delegations in the financial sector have increased to promote Beijing’s agenda. In September 2025, for instance, representatives from PBC and the China Development Bank (CDB) met with their Brazilian counterparts at the Ministry of Economy headquarters in Brasilia to discuss connectivity between the Shanghai, Shenzhen, and São Paulo stock exchanges and the increased use of local currencies in trade and investment.
Senior Chinese government officials are also involved in financial diplomacy. During his visit to Peru in November 2024, President Xi Jinping met with representatives of the Central Reserve Bank of Peru to discuss financial cooperation.
“The increase in visits by delegations from the People’s Bank of China and state-owned banks to Latin American financial institutions is part of a very clear strategy by Beijing, which consists of using credit, payment infrastructures, and currency as geopolitical instruments,” says Silveira.
The number of bilateral agreements between Latin American central banks and the PBC has grown significantly. Countries such as Brazil, Argentina, and Chile have signed currency swap lines that allow them to trade directly in yuan, reducing their dependence on the U.S. dollar. In May 2025, the Central Bank of Brazil renewed its currency swap with the PBC worth $28 billion for a period of five years, with the aim of reducing exposure to the U.S. dollar.
“When a developing country borrows heavily in yuan from Chinese banks, it is not just diversifying its currency. It is entering into an asymmetrical relationship that reduces its room for maneuver in the event of a crisis, with possible pressure from China, for example, on U.N. voting or port concessions,” says Silveira.
The unclear terms of Chinese credit agreements in other countries and the tendency to replace multilateral institutions, such as the World Bank and the International Monetary Fund, with bilateral agreements established by Beijing, introduce vulnerabilities that could impact the borrower countries’ credit ratings and reputation for financial transparency among international investors.
This financial diplomacy is sold as an advantageous partnership, but it often creates a relationship of dependency with a high exit cost. “The PBC has no transparent mandate or operational independence. This means that monetary policy, interest rates, liquidity, and the exchange rate are adjusted to internal political objectives, and there are no institutional guarantees that the central bank will defend the long-term stability of the currency against the short-term interests of the regime,” concludes Silveira.
