A monetary judge has discussed how a BRICS-wide common currency might compete with the US dollar. She noted that only China was a member of the BRICS economic team to have such a reserve currency and that both foreign exchange reserves and investor confidence were required.

Economist on the Chinese Yuan and Reserve Currency

Nicky Weimar, the chief economist of the South African financial services company Nedbank, spoke last week on how a suitable BRICS currency may threaten the power of the U.S. dollar, according to Independent Online. Brazil, Russia, India, China, and South Africa make up the BRICS group.

Weimar stressed that in order to achieve the economic bloc’s goal of reducing its support for the USD and developing a reserve currency comparable to the USD:

You require both foreign currency reserves and the confidence of the investing community.

The Federal Reserve’s backing, which the market trusted, led to the U.S. dollar becoming the world’s reserve currency, the economist added.

“The United States has never had a debt default. Although it has often made people feel uneasy, it has never truly defaulted on its debts. For any of the BRICS member nations, the same cannot be stated. That’s the first issue, according to Weimar. In the thick of a recent debt limit crisis, the United States was able to avoid defaulting on its debt obligations.

See also  Is Ethereum's Recent Downside More Than Just a Minor Event?

According to Weimer, the second issue was that China was the only member of the BRICS economic bloc to hold such a reserve currency. He continued:

But capital controls exist in China. If you have capital controls, you cannot have a reserve currency. Therefore, if China genuinely wants to compete with the dollar, it will need to undertake significant financial liberalization in order to make this possible.


She observed that China is capable of doing this but that significant changes must be made and said, “I don’t actually see them talking along those lines. It almost seems as though they haven’t yet realized that you need to lose some control. Additionally, you must always be prepared to give it.


Leave a Reply