BRICS member China is aggressively pushing its native currency, the Chinese Yuan, to compete against the US dollar, Euro, Pound, and other local currencies. In a first, the Chinese Yuan surpassed the Euro becoming the second main currency in SWIFT transactions. Euro’s use in international SWIFT payments is at its 3-year low while the Chinese Yuan is at its 5-month high.
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Data from SWIFT shows that cross-border transactions in Euro fell from 32.64% to 31.74%, a decline of close to 0.9%. On the other hand, the Chinese Yuan narrowed the gap reaching a high of 3.71% in September last month. SWIFT payments in the Chinese Yuan increased by 2.77% from the previous month in August 2023.
BRICS: Chinese Yuan Taking on the US Dollar & Euro
Though the numbers seem narrow, the development indicates a paradigm shift in favor of China in the currency markets. This is the first time that the Chinese Yuan exceeded the 3% benchmark in the last 20 months. The Chinese Yuan is only second to the US dollar which climbed from 41.74% to 42.71% during the same period.
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The global economy is experiencing a gradual shift after BRICS kick-started the de-dollarization initiative early this year. China is leading BRICS to end reliance on the US dollar and also take on the Euro, Pound, and Yen. While BRICS is briefly successful, the threat could turn bigger in the coming years and challenge Western hegemony.
BRICS is looking to end using the US dollar for global transactions in the next three years by 2026. Read here to know how many sectors in the US could be affected if BRICS stops using the dollar for global trade. In conclusion, while this may seem a slim win for the Chinese Yuan, the long-term threat to the US dollar and Euro looms.