Dollar and yuan notes
US dollar and Chinese yuan notes Reuters

Argentina is looking to tackle the depletion in its foreign exchange reserves with a currency swap deal with China after the country fell into its second default in 12 years.

Reuters citing Argentine monetary authority reported the country's central bank chief, Juan Carlos Fabrega, met with his Chinese counterpart to discuss the possibility of a currency swap deal worth billions of dollars.

The deal would allow Argentina to pay Chinese imports with the yuan, instead of the US dollar. The country's US dollar reserves are depleting fast due to weak export revenues. The Argentine peso's continued slide has also put the country's central bank under pressure.

Argentina's La Nacion newspaper without citing sources reported that the Buenos Aires government would receive a first tranche of yuan worth $1bn (£612m, €772m) before the end of the year.

Argentina's President Cristina Fernandez and her Chinese counterpart agreed in July a loan worth $11bn from China.

Following the country's economic collapse in 2001-2002 and its currency's devaluation, Argentina has found it nearly impossible to attract international loans at market rates. It has since been using its foreign reserves to meet its international payments.

The country has been suffering from a capital flight and dollar shortage since 2011, making it difficult to legally trade pesos for US dollars.

In an attempt to control the situation, the government has introduced a number of restrictions on transactions involving foreign currency. That included a 35% tariff on credit card transaction abroad.

Despite the measures, Argentina's foreign reserves recently plunged to their lowest level in more than seven years.

The development has pushed the peso to new lows in further troubles for Latin America's third-largest economy, which is already suffering from high inflation rates and declining investor confidence.

In addition, the country fell into technical default after a US judge blocked a coupon payment to the holders of its restructured bonds, because of its lawsuit with holdout creditors.

The country is trying hard to resolve the situation and boost its credit profile in the international market.

"During the meeting, the head of the People's Bank of China conveyed to Fabrega his country's support to Argentina in its dispute with bondholders in a New York Court," Argentina's central bank said in a statement.