The BRICS New Development Bank (NDB) is touting the Chinese yuan for funding across the Global South. China’s onshore bond market is backed by liquidity, and the local currency remains stable against the US dollar. This puts it in the league to provide loans for developing countries in the Chinese currency. Borrowing costs in the local currency are low, which can save millions in foreign exchange rates.
In addition, China’s President Xi Jinping has been aggressively pushing the Chinese yuan for a long-term use case in the BRICS-led New Development Bank. This is the perfect stepping stone for Jinping to put his national currency for lending through the bank. The development will further strengthen the yuan in the forex markets and stabilize it against the US dollar.
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BRICS: Chinese Yuan To Be Used to Fund the Global South via New Development Bank
The borrowing costs in the Chinese yuan are low, said Zhongxia Jin, the BRICS-led New Development Bank’s Director General for Treasury and Portfolio Management. He added that the Chinese bond market “is now one of the most cost-effective funding sources in the world.” The cost-cutting currency will benefit emerging economies and also power up their infrastructural projects and lending capacity.
“We don’t just see the Chinese bond market as a source for cheap cash; we see this market as the future of local currency finance,” Zhongxia said, affirming that the yuan is the best solution for the BRICS-led New Development Bank. “The Chinese bond market is no longer just an alternative asset class; it tends to become a key pillar of global financial architecture,” he said.
The BRICS New Development Bank switched from lending in the US dollar to the Chinese yuan in 2022. The Indian rupee, the Russian ruble, and the South African rand are also being used for infrastructural loan disbursement. The loans are mostly for the Global South, Latin America, and several countries from the African continent.