Libya is taking China’s assistance to cut its US dollar dependence and is rewiring trade deals with the Xi Jinping administration. The Governor of the Central Bank of Libya, Naji Mohammed Issa, and the Governor of the People’s Bank of China (PBOC), Pan Gongsheng, agreed on Saturday to connect Libyan commercial banks to China’s payment and settlement system to reduce reliance on the US dollar.

The meeting between the two counterparts took place during Issa’s visit to Beijing last week. Both countries reviewed the volume of trade between them and discussed ways to strengthen and increase it. China will accommodate Libya in the Cross-Border Interbank Payment System (CIPS), which will give prominence to the yuan and reduce the reliance on the US dollar.

The payment infrastructure will enable banks to send and receive yuan-denominated payments directly from the Libyan counterpart. The development eliminates the need to process cross-border transactions through intermediary banks. This pushes the US dollar out of having any role to play in trade between China and Libya. It strengthens the yuan, while also making Libya diversify its economy and reserves.

Also Read: Ripple (XRP) Partnering With MasterCard, JP Morgan, OKX, & OndoFinance

US Dollar Remains Out of Libya and China’s New Payment System Policy

China and Libya agreed to allow letters of credit to be opened directly through Chinese banks. The banking delegation called the opportunity a “genuine strategic partnership” that can change the way Libya operates. It also puts Libya in Beijing’s good books, allowing it to receive more funding for infrastructural projects. Moreover, the Belt and Road Initiative (BRI) is the most sought-after by African countries.

“The importance of launching a new phase of genuine strategic partnership between the two central banks was discussed. It was agreed to connect Libyan commercial banks to China’s Cross-Border Interbank Payment System, CIPS, which will simplify financial transfers and make them easier to conduct,” Issa said in the Saturday statement.