BRICS Report: 50% of China's Trade Now Conducted in Chinese Yuan

• BRICS Strives for De-Dollarization as Chinese Yuan Gains Traction
• RMB Usage in Cross-Border Payments
• G7 Sanctions and The Shift From US Dollar
• Fall of The US Dollar - Macroeconomic Factors
• Expansion of BRICS and China's De-Dollarization Mission in 2024
• The Deterioration of US Dollar Borrowing in 2023

BRICS Strives for De-Dollarization as Chinese Yuan Gains Traction

In 2024, BRICS nations are persistently advocating for the replacement of the US Dollar in global trade. Correspondingly, China reports that it is now processing half of its trade transactions in the Chinese Yuan (RMB). The Atlantic Council has presented data indicating that approximately 80 percent of the utilization of RMB outside China takes place in Hong Kong. Remarkably, the international use of the Chinese Yuan almost doubled in 2023.

RMB Usage in Cross-Border Payments

The uptick in the utilization of RMB in bilateral cross-border payments, facilitated by currency swap arrangements of central banks, suggests that the actual use rate might be significantly higher. China's preference to conduct half of its trade in the Chinese Yuan is primarily attributed to the imposition of US sanctions.

G7 Sanctions and The Shift From US Dollar

The G7 sanctions, which were established following Russia's unlawful invasion of Ukraine in early 2022, amplified global concerns regarding the excessive dependence on the US dollar. Consequently, nations embarked on a quest for alternatives, leading to the popularity of BRICS' de-dollarization initiative. This mission has seen numerous countries expressing their interest in joining the bloc.

Fall of The US Dollar - Macroeconomic Factors

Moreover, the US Dollar has been subjected to macroeconomic challenges, contributing to its diminishing appeal. These include the surge in inflation last year, coupled with multiple interest rate increments. China and Russia are at the forefront of the movement to abandon the US dollar, triggered by their ongoing conflict with the West. However, the recruitment drive for de-dollarization has thus far proven successful.

Expansion of BRICS and China's De-Dollarization Mission in 2024

In August, fresh invitees joined China and BRICS and formally became members at the outset of 2024. Across the world, more nations are aspiring to become part of BRICS+ either before or during this year's summit. Countries that are susceptible to sanctions are prominently contributing to the growth of the Chinese Yuan and the simultaneous decline of the US Dollar. This list includes most ASEAN countries, Argentina, Brazil, and various Gulf nations.

The Deterioration of US Dollar Borrowing in 2023

Borrowing in US dollars became notably more costly and scarce in 2023, subsequently stimulating emerging market firms to explore dollar alternatives in 2024, such as the RMB. Considering the weakening strength of the US dollar, the Chinese Yuan is emerging as one of the preferred alternatives to counter this trend.

Edited by Jonathan Stoker