BRICS member China is looking to make the Chinese yuan the world’s reserve currency by toppling the US dollar. China has been convincing BRICS to kick-start the de-dollarization process and settle trade in local currencies. While this is one way to reduce dependency on the US dollar, not every developing country is on board with China’s ideals.
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The Communist country was the first to push the de-dollarization agenda after the US pressed sanctions on Russia in 2022. The Xi Jinping administration went on a world tour convincing developing countries to accept the Chinese yuan for trade settlements. Read here to know how many sectors in the US will be affected if BRICS ditches the dollar for trade.
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BRICS: The Chinese Yuan Will Not Outperform the US Dollar as the World’s Reserve Currency
A currency runs on ‘trust’ and is the most important part of the forex markets. Without trust, any currency can fall apart making the way for other currencies to take the top spot. Trust in the US dollar has not eroded and will not go away in the coming decades despite the BRICS de-dollarization attempts. Let alone foreign investors, even large businesses in China don’t want the Chinese yuan and are looking to hoard the US dollar.
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China had to whip multinational corporations by announcing that they needed to trade in the Chinese yuan for a part of their transactions. These forced de-dollarization initiatives by BRICS member China will not stand for long and could fall apart sooner or later. Only a handful of countries trust the Chinese yuan while the majority believe the US dollar is the strongest.
The latest data from the Atlantic Council shows that the US dollar is used for almost 88% of all global transactions. Therefore, the US dollar’s dominance is strong with little to no challenge from the Chinese yuan. The BRICS country China might not see the Chinese yuan beating the US dollar, at least in our lifetime.