BRICS isn’t de-dollarizing anytime soon

BRICS Summit host Russian President Vladimir Putin disappointed both anti-colonial enthusiasts and Western alarmists last week by conceding that the bloc’s members “have not built and are not” building a payment system to challenge the US dollar-based global banking system.

The leaders of the two economic giants present at the summit, China’s Xi Jinping and India’s Narendra Modi, did not mention alternative payment arrangements in their respective remarks.

The technical requirements for alternative payment systems aren’t the problem. The SWIFT system that controls interbank payments in dollars and other major Western currencies merely transmits secure messages.

The challenge, rather, is economic: US demand for imports fuels an outsized portion of economic growth in the Global South. China’s exports to the US amount to just 2.3% of its GDP, but about half of its surge in exports to the Global South since 2020 depends on re-exports to the United States.

While China’s exports to the Global South more than doubled from about US$60 billion a month to $140 billion a month, US imports from the Global South rose from about $60 billion a month to $100 billion a month during the past four years.

Dependence on the US market varies widely across the universe of developing countries. Vietnam and Mexico, the two favorite venues for so-called “friend-shoring,” that is, transferring production away from China to putatively friendlier countries, registered big increases in exports to the US as a share of GDP.

Vietnam’s exports to the US in 2023 amounted to about 27% of the country’s GDP, compared to just 10% in 2020, while Mexico’s US exports rose to 27% of GDP in 2023 from 20% in 2010.

Singapore and Malaysia, by contrast, showed little