China Promotes the Yuan to the BRICs

China has been promoting her currency as alternative to the US dollar

Writes the Reuters/Financial Times

China is planning to extend renminbi loans to other major emerging BRIC countries, in another step toward the expansion of the yuan's role in foreign exchange, the Financial Times reported on Wednesday.

The China Development Bank (CDB) will sign a memorandum of understanding at a meeting with its BRICs counterparts - Russia, South Africa, Brazil and India - in New Delhi on March 29, the newspaper reported, citing people familiar with the talks.

Under the agreement CDB, which lends mainly in dollars overseas, will make renminbi loans available, while the other BRICs nations' development banks will also extend loans denominated in their respectivecurrencies, the FT said in an article published on its website.

The renminbi is the official currency of China and its primary unit is the yuan. Of the six largest economies in the world, China is the only one whose currency does not have reserve status.

The initiative aims to boost trade between the five BRICs nations and promote use of the renminbi, rather than the U.S. dollar, for international trade and cross-border lending, the FT said.

China appears to be ‘flanking’ the US by promoting her currency with ASEAN through trade, and now with other major emerging markets.

This is not to say that China’s yuan will replace the US dollar (whatever monetary standard the world will embrace in the future is beyond our ken, as I can only guess), instead these seem emblematic of attempts by several nations to wean away from the US dollar standard, possibly as insurance or as diversification strategy to reduce currency risks.