The US dollar is currently standing on a vulnerable threshold as its foes have started to double up at a rapid pace. As an active BRICS member, China has already ditched the dollar and is deepening ties with ASEAN, an alliance that pioneers the multipolar currency agenda.
The collective strength of BRICS and ASEAN doubling down on the US dollar could prove lethal for the currency as the regional currency narrative, coupled with de-dollarization, is growing stronger with each passing time.
In this quest, China has deepened its ties with ASEAN, as the recent McKinsey & Company outlines the stark geopolitical shifts that these regions are active parts of.
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China And ASEAN: Strengthening Economic Ties And Impact On The US Dollar
Deepening Trade Relationship
The economic interdependence between Asia and other regions is doubling rapidly. According to McKinsey and Company’s latest report, China is growing its trade dependence with ASEAN, with the bloc accounting for nearly 15% of trade with China in 2023. Similarly, China reciprocated in terms of trade by initiating trade deals worth 20% with ASEAN.
“ASEAN accounted for 15 percent of China’s total trade in 2023, up from 10 percent in 2010. while China accounted for 20 percent of ASEAN’s total trade in 2023, up from 12 percent in 2010. Further integration could be propelled by the Regional Comprehensive Economic Partnership. Dubbed the world’s largest free-trade agreement, which covers 15 economies in the Asia-Pacific region.”
The report further highlights the incredible progress that ASEAN nations have been making recently. ASEAN nations have reported a 6% hike in annual trade, while China and India have reported a 7% hike in their annual trade metrics.
“Many Asian economies’ annual trade grew faster. By 6 percent in ASEAN, by more than 7 percent in China and India. And by 8 percent in Vietnam.”
ASEAN As A Connector Between China And The US
China and ASEAN, on the other hand, China and ASEAN have emerged as top international partners, with ASEAN emerging as a connector between China and the US. Between 2017 and 2013, trade between China and the US drastically declined, with Vietnam emerging as a strong economic force.
“Between 2017 and 2023, trade between the United States and China fell. But ASEAN emerged as a “connector” between these two economies. In this period, ASEAN imports from China surged while ASEAN exports increasingly went to the United States. In the case of Vietnam, the value of imports from China doubled. An addition of $50 billion and its exports to the United States increased by $60 billion.”
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Bad News for the USD?
With China inching away from the dollar, global economies are now adopting this narrative. The BRICS alliance, continuously growing with new countries applying for admission, now stands as an active threat to the US dollar’s hegemony.
On the other hand, ASEAN is also pushing for an active de-dollarization drive. The bloc is urging nations not to rely on the USD for future trade and is pioneering the local currency agenda, which again is pushing the USD down in the corner.
If the trend continues, the US dollar derailment may reach its peak, which could jeopardize its global positioning as the leading reserve currency.
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