A recent report from China’s Global Times reveals that Zhou Yu, an international finance research director at the Shanghai Academy of Social Sciences, believes that the proposed BRICS cross-border currency is a significant step in challenging the dominance of the U.S. dollar. Zhou asserts that the recent initiatives to promote local currency settlement have provided BRICS countries with a competitive advantage in diminishing the influence of the greenback in global trade.
Shanghai Academy Research Director Says BRICS Common Currency Is a ‘Plausible Alternative’ to the Dominant Greenback
The BRICS nations, encompassing Brazil, Russia, India, China, and South Africa, have been actively engaged in discussions concerning the establishment of a cross-border currency. This newly proposed topic will be a focal point of the upcoming leaders’ summit, scheduled to take place in Johannesburg, South Africa, on August 22, 2023.
In an eventful second week of May, Naledi Pandor, the South African minister of international relations, cautioned against hastening the development of a BRICS cross-border currency. Simultaneously, Zhou Yu, a director at the Research Center of International Finance in the Shanghai Academy of Social Sciences, shared insights on the feasibility of the proposed common currency in an interview with the CCP-supported Global Times.
“Despite the daunting difficulties such an effort faces, it is not entirely impossible for these nations to have such a currency unit,” Zhou said in the interview. “However, currently the effort by BRICS nations seems to be focused on devising a currency unit used specifically to settle cross-border trade, rather than a currency unit to replace other local currencies, which reduces the difficulty of such efforts and increases its plausibility,” Zhou added.
The effort to settle trade in local currencies has been a focus in recent months. For instance, South Africa’s BRICS Sherpa opined that member nations need to “strengthen economic cooperation.” Zhou explained that a common BRICS currency would take a long time like the creation of the euro, because the proposed BRICS currency is not competition for local fiat; it should be quicker to craft and roll out to members.
U.S. Experts Dismiss De-Dollarization Fears
In recent months, there has been a notable emphasis on settling trade transactions using local currencies. A prime example of this focus is South Africa’s BRICS Sherpa, who expressed the need for member nations to “enhance economic cooperation.” Shedding light on the matter, Zhou stressed that the establishment of a unified currency among the BRICS countries would require a substantial amount of time, drawing parallels to the creation of the euro.
However, Zhou clarified that unlike local fiat currencies, the proposed BRICS currency is not intended to compete but rather aims to be developed and implemented among local fiat currencies. According to Zhou, the accelerated growth of local currency settlement represents the most tangible and momentous stride undertaken by BRICS nations to diminish the alleged hegemony of the dollar in trade settlements.
Although the BRICS common currency is hailed as a means to diminish the supremacy of the US dollar in worldwide trade, certain skeptics remain unconvinced of its potential success. Renowned finance expert and author Dave Ramsey recently dismissed worries about de-dollarization, while American political scientist Ian Bremmer asserted that proclamations of the greenback’s demise are exaggerated. In a recent op-ed, Keynesian economist Paul Krugman attributed the de-dollarization trend to individuals who are “always predicting hyperinflation.”
What do you think about Zhou’s opinion shared with the Global Times? Do you think a BRICS common currency can undermine the dominant greenback? Let us know what you think about this subject in the comments section below.