The BRICS Summit: Shaping Global Trade
The international spotlight is on Johannesburg this week, August 22-24, as it hosts the much-anticipated BRICS summit. Comprising Brazil, Russia, India, China, and South Africa, BRICS as a bloc has been steadily and increasingly reshaping the economic landscape with its significant impact on global trade. This year, the summit carries considerable weight as two pressing matters dominate the discussions: the possibility of expansion and the ongoing war in Ukraine.
Interest in BRICS Membership: Pragmatism Over Morality
At first glance, it might seem odd for any country to aspire to join a group that includes Russia, given its controversial role in the Ukraine crisis. However, the world operates on pragmatic diplomacy rather than moral judgments alone. Surprisingly, many nations are expressing interest in becoming a part of BRICS.
Analysts at ING Bank, namely Chris Turner, Dmitry Dolgin, and James Wilson, recently published a note shedding light on the intriguing economic shift. They posit that the “de-dollarization” trend, wherein countries are moving away from the U.S. dollar as their primary reserve currency, is set to grow. The momentum for this trend could surge after the Johannesburg summit, especially if BRICS decides to expand its membership.
Countries like Saudi Arabia, possessing considerable economic clout, are eager to join the BRICS alliance. This interest isn’t confined to the wealthy nations alone; countries grappling with economic setbacks, such as Argentina and Venezuela, are also in line.
But why the rush to join BRICS, especially with the controversial presence of Russia? A deeper delve reveals an emerging narrative that there’s a palpable shift toward the Chinese yuan as a potent alternative to the U.S. dollar.
The Yuan’s Rise and ‘De-dollarization’: Implications for BRICS Expansion
With its vast manufacturing base and sprawling market size, the Chinese economy has been at the forefront of this movement. Beijing’s investments in various countries and China’s Belt and Road Initiative have positioned the yuan as a currency with increasing global acceptability.
ING’s analysis suggests that as the BRICS bloc potentially expands, this could further solidify the yuan’s place as a de facto global currency, challenging the long-standing hegemony of the dollar.
“The subject of ‘de-dollarization’ might gain some traction this summer when senior leaders of the BRICS nations meet,” the ING note highlighted. This statement underscores this summit’s potential impact on the world’s economic order.
However, these are speculative trends for now, and the world awaits the summit’s outcomes. Will BRICS opt for expansion? Will the yuan’s ascent receive an implicit nod? One thing is certain: the world is watching Johannesburg, and the ripples from this summit might reshape global finance’s contours.
