Julia Gillard, Australia’s Prime Minister, visited China last week to negotiate a currency conversion agreement with China and to reassure China that its expanding military ties with the U.S. should not pose a problem to China’s interests.

The agreement would help position the Chinese yuan on a more focused path towards full convertibility on global markets. At present, the U.S. dollar serves as the world’s reserve preferred currency for trade and serves as the intermediary between Chinese and Australian trades. Australia’s move to secure a conversion deal with China may dampen the reign of the U.S. dollar as currency of preference for trading matters.

Gillard’s visit also aims to alleviate any unrest China may have in regards to Australia’s new defense agreements with the United States these past few years. The Australian PM noted that there was no competition between the United States and China for Australia’s allegiance. However, political critics claim that Australia is in the “Asia Century” believing that Australia’s economic well-being is tied to China, which happens to be its leading trading partner.

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