- BRICS nations discuss potential of introducing a common currency to challenge the dollar’s dominance.
- China and India’s strained ties cast shadows on the feasibility of a joint currency for the BRICS bloc.
Rethinking the World’s Reserve Currency
For over a year, the global economic community has been abuzz about the potential contenders poised to challenge the U.S dollar’s reign as the world’s reserve currency. Whether it’s the Chinese yuan, gold, or even Bitcoin, these discussions have gained momentum. The heat of the debate intensified with Washington’s financial strategies against Russia, stoking discussions within the BRICS (Brazil, Russia, India, China, South Africa) group to consider a common currency during their summit in August.
The emergence of a common currency within the BRICS countries would signify a monumental shift in the global financial system. To truly grasp the scale of this undertaking, one must only look at the Euro’s journey. Despite decades of preparation and planning, the Euro remains a distant second to the dollar in global transactions. This illustrates the magnitude and complexity of creating and implementing a unified currency.
The India-China Conundrum
A shared currency’s success hinges on the mutual agreement and cooperation of the involved nations. And therein lies a significant hurdle. India and China, the two dominant economies in the BRICS bloc, have a long history of disagreements and geopolitical tussles. Jim O’Neill, the economist behind the original “BRIC” acronym, expressed skepticism about the likelihood of these two giants finding common monetary ground. He stated,
“You can’t even get India and China in the same room, so the idea that they would commit to a shared currency… it’s just kind of crazy.”
Their relationship, stretching back centuries, is complex and multi-faceted. While historical territorial disputes have seen occasional escalations, modern geopolitical issues and rising nationalism have added new dimensions to their interactions. While a momentary truce seemed to emerge during the BRICS summit in Johannesburg, Xi Jinping’s subsequent absence from the G20 Summit in New Delhi raised eyebrows, sparking more discussions about the tenability of their alliance.
Economic rivalries further complicate the scene. Both nations have emerged as leading global economies, with China valued at $19.4 trillion and India at $3.7 trillion. Their strategic economic positions have placed them as fierce competitors in the global marketplace. India’s recent demographic milestone of becoming the world’s most populous country presents an appealing alternative for businesses diversifying from China, the world’s manufacturing hub.
Abishur Prakash, a geopolitical expert, noted the friction between India and China as a “pain point” within the BRICS coalition. He emphasized the unlikely scenario of either country adopting a currency dominated by the other.
Despite these evident challenges, some experts believe that a potential BRICS currency might find niche applications, catering to specific settings or projects within the BRICS domain.