Can BRICS De-dollarize the Global Financial System?

Abstract

Existing scholarship has not systematically examined BRICS (Brazil-Russia-India-China-South Africa) as a rising power de-dollarization coalition, despite the group developing multiple de-dollarization initiatives to reduce currency risk and bypass US sanctions. To fill this gap, this study develops a 'Pathways to De-dollarization' framework and applies it to analyze the institutional and market mechanisms that BRICS countries have created at the BRICS, sub-BRICS, and BRICS Plus levels. This framework identifies the leaders and followers of the BRICS de-dollarization coalition, assesses its robustness, and discerns how BRICS mobilizes other stakeholders. The authors employ process tracing, content analysis, semi-structured interviews, archival research, and statistical analysis of quantitative market data to analyze BRICS activities during 2009-2021. They find that BRICS' coalitional de-dollarization initiatives have established critical infrastructure for a prospective alternative nondollar global financial system. This title is also available as Open Access on Cambridge Core.

Dollar-Yuan Battle in the World Trade Network

“…These results, obtained from the intertwined structure of international trade flows, echo the current questioning about a hypothetical replacement of USD by CNY as the global currency [3,4,[6][7][8]34] and the current trends consisting to label contracts in CNY for Saudi Arabia to China or Russia to China crude oil and petrol imports [8][9][10]35,36]. Although the road to the internationalization of the CNY is still long [37] and although some serious criteria, such as the transparency of China's financial markets and the perceived-fromabroad-stability of the Chinese monetary policies, are still lacking to turn CNY into a global currency, our results nonetheless show that the international trade network is ready to harbor the USD vs. CNY competition and the possible USD to CNY transition.…”

“…Till now, the USD remained the dominant world trade currency, and, as an example, the United Nations (UN) reports world trade transactions between countries in USD [2]. However, the possible end of the dollar dominance is increasingly discussed as the Chinese yuan (CNY) is gradually becoming credible as a reserve currency [3][4][5][6][7][8][9]. Moreover, recently important trade transactions were considered to be realized in CNY instead of USD, such as oil sales from Saudi Arabia to China [10].…”

The future of the international financial system: The emerging CBDC network and its impact on regulation

“…For these states, CBDC could enable direct payments between states, bypassing US‐dominated systems (Nelson, 2022). The revolutionary nature of CBDC may allow states to develop new systems, rather than reforming the status quo (Liu & Papa, 2022, p. 16). CBDCs accepted by a cluster of these states may become possible “nondollar club goods” (Liu & Papa, 2022, p. 16).…”

“…The revolutionary nature of CBDC may allow states to develop new systems, rather than reforming the status quo (Liu & Papa, 2022, p. 16). CBDCs accepted by a cluster of these states may become possible “nondollar club goods” (Liu & Papa, 2022, p. 16). New regional reserve currencies may emerge in these clusters (Committee on Payments and Market Infrastructures, et al, 2021, p. 18).…”

Contesting Western narratives: BRICS media coverage of the Russia–Ukraine war

“…The Russian invasion of Ukraine and the resultant widespread sanctions on Russia by Western governments and corporations have brought the issue of de-dollarization to the fore. Emerging as a 'rising power de-dollarization coalition', BRICS nations have been working on developing a new reserve currency based on a basket of currencies for its members (Liu and Papa, 2022).…”