As BRICS continues to push to ditch the US Dollar in 2024, China is now settling half of its trade in the Chinese Yuan (RMB). According to a report from the Atlantic Council, about 80 percent of the use of RMB outside of China takes place in Hong Kong. However, global use of the Chinese Yuan nearly doubled in 2023. However, the use of RMB in bilateral cross-border payments facilitated by central banks’ currency swap arrangements may indicate that the use rate is higher.
China’s decision to settle half of its trade in the Chinese Yuan primarily comes due to US sanctions. G7 sanctions imposed following Russia’s illegal invasion of Ukraine in early 2022 raised more concerns globally about over-reliance on the US dollar. Instead, nations began looking for alternatives. Hence, BRICS’ mission for de-dollarization became popular, and multiple countries shared an interest in joining the bloc.
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Besides these sanctions, the US Dollar was also facing macroeconomic headwinds, which also contributed to its decline in interest. This includes growing inflation last year as well as multiple interest rate hikes. China and Russia are by far the leaders in ditching the US dollar due to their tensions with the West, however, recruitment for de-dollarization has been successful thus far.
More Nations To Join BRICS and China’s De-Dollarization Mission in 2024
In August, new countries were invited to join China and BRICS and officially joined at the beginning of 2024. More nations globally are hoping to join BRICS+ at or before this year’s summit. Countries at risk of sanctions are big contributors to the growth of the Chinese Yuan and the ditching of the US Dollar. This includes most ASEAN countries, Argentina, Brazil, and other Gulf nations.
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Borrowing in the US dollar became more expensive and scarcer in 2023. In turn, this encourages emerging market firms to seek dollar alternatives in 2024, such as the RMB. Now that the US dollar is also lowering in strength, the Chinese Yuan may be one of the more popular choices to counter it.