Brazil and China are working towards using their own currencies rather than the US dollar in trade transactions, a plan first discussed during talks between President Lula and President Hu Jintao at the G20 summit in London in April.

An official in Brazil’s central bank quoted in the Financial Times said 'What we are talking about now is Brazil paying for Chinese goods with reais and China paying for Brazilian goods with renminbi'.

Brazil already has a similar agreement with Argentina, allowing exporters and importers to use pesos and reais.

China is now Brazil's biggest trading partner, ahead of the US. A package of further trade deals between the two countries was signed earlier this week during President Lula's visit to Beijing, including Chinese loans totalling $10bn for the Brazilian state oil company Petrobras.

Source: Embassy of Brazil in London