I don’t think China plans to turn RMB into any sort of reserve currency either, but it is starting to play that role to an extent now because it’s the most useful currency outside the USD right now. Pretty much all countries import stuff from China, so holding RMB makes sense because you can always convert it into something useful that you need. This is why we’re seeing trade outside the dollar increasingly happening in RMB. However, I do think the long term plan will be to create some sort of a BRICS currency that will be used to do exchange and it looks like it’s likely to be modelled on the Bancor idea that Keynes proposed after WW2.
Yes it is true that due to the high volumes of bilateral trade it makes sense for countries to hold RMB, but that is predicated on a mutual trade in national currencies, so China will also be holding reserves of the currencies of different countries with which they wish to trade.
And yes, a BRICS “exchange currency” is almost certainly coming at some point, but it won’t be actually used as currency domestically in the BRICS countries like the Euro is in the EU. It will be used to settle balance of payments in international trade deals. I fully expect every BRICS member to retain sovereign control over their own currency, or at most cede that control to regional blocs, like say if at some point we see a South American Union or a regional African Union, and these may have a common currency.
I don’t think China plans to turn RMB into any sort of reserve currency either, but it is starting to play that role to an extent now because it’s the most useful currency outside the USD right now. Pretty much all countries import stuff from China, so holding RMB makes sense because you can always convert it into something useful that you need. This is why we’re seeing trade outside the dollar increasingly happening in RMB. However, I do think the long term plan will be to create some sort of a BRICS currency that will be used to do exchange and it looks like it’s likely to be modelled on the Bancor idea that Keynes proposed after WW2.
Yes it is true that due to the high volumes of bilateral trade it makes sense for countries to hold RMB, but that is predicated on a mutual trade in national currencies, so China will also be holding reserves of the currencies of different countries with which they wish to trade.
And yes, a BRICS “exchange currency” is almost certainly coming at some point, but it won’t be actually used as currency domestically in the BRICS countries like the Euro is in the EU. It will be used to settle balance of payments in international trade deals. I fully expect every BRICS member to retain sovereign control over their own currency, or at most cede that control to regional blocs, like say if at some point we see a South American Union or a regional African Union, and these may have a common currency.