Russia and China have decided to break traditional norms by ditching the US dollar for their bilateral trade. This shift is a significant change. More than 90% of their trade is now conducted using currencies other than the dollar. It departs from the long reliance on the dollar as the world’s primary reserve currency. It has substantial implications for the geopolitical and economic balance.
🚨🇷🇺🇨🇳 RUSSIA & CHINA have announced they will completely STOP using the US Dollar in their commercial transactions! PIC.TWITTER.COM/EH9QGT2BKC
— Jackson Hinkle 🇺🇸 (@jacksonhinklle) FEBRUARY 20, 2024
The announcement comes as both nations seek to strengthen their economic ties. They also want to reduce their dependence on the US-dominated financial system. This move shows that emerging powers want to be independent. They also want to change how trade works. The decision to trade in their currencies challenges the US dollar‘s dominance. It also shows the growing collaboration between Russia and China.
This move could weaken the US dollar’s status. It is the world’s primary reserve currency, a role it has held since the end of World War II. The shift from the dollar will likely speed up the de-dollarization trend. Other nations are rethinking their reliance on the dollar in international transactions.
Russia, in particular, has been actively pursuing de-dollarization measures. Following Western sanctions related to its invasion of Ukraine, Russia aims to diversify its economy away from the dollar. Some measures include avoiding “unfriendly” currencies. They also have to work with China. The goal is to create a new reserve currency. This currency will challenge the dollar’s dominance in global trade.
China, too, has been assertive in promoting bilateral trade settlements in local currencies. Recently, China and Brazil announced a deal. They will settle their trade using their currencies. They will bypass the dollar as an intermediary. This move is expected to enhance trade efficiency and encourage bilateral investment.
The BRICS group includes Brazil, Russia, India, China, and South Africa. They have been working on a solid plan to shift away from the dollar. They aim to persuade other developing nations. These include Saudi Arabia, Pakistan, and some African countries. They want them to switch from the dollar to local currencies like the Chinese Yuan for trade.
The implications of this move are not confined to the economic sphere alone. In terms of geopolitics, it shows a growing alliance between Moscow and Beijing. This challenges the old power dynamics that have shaped global politics for decades. The two nations are pivoting away from the dollar. They are signaling their plan to make a more multipolar world order.
Russia and China decided to stop using the US dollar in their trade. This could spark a global shift in trade. The move comes as the world is seeing trade patterns shift. This is due to trade tensions, rising product demand, digital tech, and COVID-19.
However, experts argue that Russia and China’s attempts to de-dollarize global markets are unlikely. They won’t pose a significant threat to the dominance of the US dollar. They point out that Russia’s fragile economy and China’s capital controls make their currencies less appealing globally.
While Russia and China’s decision to abandon the US dollar in bilateral trade is significant, it is just one piece of a giant puzzle. The global economic landscape is complex and constantly evolving, with multiple factors influencing the dynamics of international trade.
As the world continues to grapple with these changes, the move by Russia and China serves as a reminder of the shifting sands of global trade. It underscores the need for countries to adapt and evolve their trade practices in response to these shifts.
The impact on the global economy is yet to be seen. But Russia and China’s decision to ditch the US dollar for trade is a watershed moment. It challenges the status quo. It could bring in a new era of multipolarity in trade and finance. The world watches an unprecedented shift. It raises questions about the future of global economic power. It also raises questions about the potential for a more diverse international monetary system.
