BRICS member China has pressed the accelerator on de-dollarization as lending in the Chinese yuan surges. China’s push for the yuan is working as trade and investments are moving away from the US dollar-based system and are entering into a multipolar world. The country’s exposure to the US dollar is declining as businesses are considering the yuan.
The latest data from the Financial Times shows that deposits and bond investments by Chinese banks quadrupled to Rmb3.4tn ($480 billion) in five years. The development shows that the US dollar is no longer the central figure of trade and commerce. The BRICS de-dollarization agenda is working, despite its scale being smaller, while Chinese yuan settlements have doubled.
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Exporters and importers in China are now using the Chinese yuan in settlements, the highest since December 2020. The move supports the BRICS de-dollarization agenda and funds the Chinese yuan in the global markets. “From China’s perspective, it is important because it shows that no matter what happens, it can still trade,” said Adam Wolfe, Emerging Markets Economist at Absolute Strategy Research in London, to the Financial Times.
BRICS De-Dollarization: Chinese Yuan Makes It To the Top
The Bank for International Settlements (BIS) weighed in on the development, estimating that lending would rise by another $373 billion. It credited the sanctions on Russia as the turning point for BRICS to kick-start the de-dollarization agenda and prioritize local currencies.
“The year 2022 marked a turning point away from dollar- and euro-denominated credit and towards renminbi-denominated credid to such borrowers,” the BIS said. This strengthened BRICS de-dollarization as the Chinese yuan took center stage.
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BRICS is also making other countries believe in de-dollarization while promoting local currencies. China, especially, is convincing other nations that using the US dollar for all cross-border transactions is a disadvantage. Chinese officials believe that “a dollar-based system is inherently unstable and has disadvantages that a multicurrency system would not have,” said Bert Hoffman, Professor at the National University of Singapore’s East Asian Institute.
