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Arab News
9 hours ago
- Business
- Arab News
Can BRICS reshape the global financial order?
In August 2023, the leaders of the BRICS nations — Brazil, Russia, India, China and South Africa — gathered in Johannesburg to declare their ambition to rewire the international system. A centerpiece of that ambition was a call to reduce dependence on the US dollar. For some, the idea sounded like deja vu; de-dollarization has been a recurring theme in emerging markets since the early 2000s. But this time, the stakes feel different. Global polarization is intensifying, financial weaponization has become normalized and the credibility of existing multilateral institutions is eroding. Yet, for all the hype, the BRICS project remains deeply flawed and uneven. The notion that BRICS could reshape the global financial order rests more on aspiration than reality. While dollar dominance is indeed being reassessed — not just by geopolitical rivals but also by pragmatic middle powers — building a credible alternative requires more than shared discontent. It demands deep capital markets, interoperable infrastructure, credible institutions and — above all — mutual trust. On all these counts, BRICS is still struggling. The desire to reduce dollar reliance is not simply ideological but a reaction to a financial architecture long shaped by US interests. The 2008 financial crisis exposed the dangers of global dependency on Wall Street. The 2022 sanctions on Russia, which froze hundreds of billions in central bank reserves and cut Moscow off from SWIFT, sent a clear signal to other BRICS members: your assets can be turned into weapons overnight. The desire to reduce dollar reliance is not simply ideological but a reaction to a financial architecture long shaped by US interests Dr. John Sfakianakis But does fear translate into capability? Not necessarily. Incremental moves are already underway. China has expanded its Cross-Border Interbank Payment System and accelerated digital yuan pilots across Asia and Africa. India has begun settling some trade in rupees, particularly with Russia and the UAE. Russia is developing Mir and the System for Transfer of Financial Messages to bypass Western financial rails. Brazil and South Africa are exploring fintech-led payment corridors. Yet, taken together, these initiatives remain fragmented, politically fragile and institutionally weak. The internal contradictions of BRICS are glaring. China's outsized role in the bloc breeds discomfort among its partners. The yuan remains nonconvertible. India and China are strategic competitors. Russia is economically isolated. Brazil and South Africa are preoccupied with their own fiscal instability. What unites them is not a shared monetary strategy but a defensive impulse — a desire to insulate themselves from the coercive tools of the current system without agreeing on a viable alternative to replace it. In this respect, the BRICS bloc echoes the spirit of the Non-Aligned Movement of the 1960s — born from frustration with superpower domination, yet too ideologically and strategically diverse to forge a coherent economic alternative. These aspirations are further undercut by a chronic lack of fiscal and data transparency across the bloc, which undermines investor confidence and complicates efforts to build trust in any shared monetary or institutional arrangement. Moreover, the dollar is not just a medium of exchange — it is an ecosystem. From commodity pricing and bond issuance to foreign exchange markets and central bank reserves, it is woven into the plumbing of global capitalism. Displacing it would require an alternative that is not only politically palatable but technically superior. BRICS is nowhere near delivering that. The New Development Bank and the Contingent Reserve Arrangement — touted as BRICS' answer to the International Monetary Fund and the World Bank — have underperformed. Lending volumes are limited. Governance structures are opaque. And the credibility of any shared macroeconomic framework remains questionable in the absence of institutional convergence. Even digital currencies, often billed as a leapfrog solution, are no silver bullet. China's e-CNY remains tightly controlled and untested at scale. Interoperability with other BRICS central bank digital currencies remains aspirational. Moreover, few of these economies inspire enough investor confidence to turn their currencies into regional, let alone global, anchors. Displacing the dollar would require an alternative that is not only politically palatable but technically superior Dr. John Sfakianakis One point bears repeating: the US may well benefit from a credible external challenge. A push from BRICS could serve as a cold slap in the face — forcing America to reckon with the fragility of its own advantages. For too long, dollar dominance has bred complacency. If confronted with a viable challenge, the US could rediscover its competitive edge — leveraging innovation, capital markets and entrepreneurial dynamism to future-proof its leadership. But let's be clear: BRICS is not that challenge yet. It is a concept in search of coherence — a geopolitical brand lacking operational capacity. Its declarations are bold but its execution remains underwhelming. The underutilization of the New Development Bank, for example, is telling: with lending volumes far below expectations and project delivery uneven, the institution reflects the broader gap between BRICS' ambitions and its administrative muscle. As for the Gulf states and other middle powers watching this evolution, caution — not commitment — is the prudent course. Strategic hedging makes sense. Deepening financial links with BRICS, especially through trade settlement, infrastructure finance and digital innovation, is worth exploring. But abandoning the Western-led system is neither practical nor desirable. The future is hybrid. Gulf countries will continue to invest the bulk of their sovereign assets in Western markets, manage reserves in dollars and euros, and rely on Western institutions for legal recourse and financial stability. Take Saudi Arabia's Public Investment Fund, for instance: despite deepening ties with China and India, 40 percent of its portfolio remains invested in the US — across equities, tech, infrastructure and real estate. Engagement with BRICS must be pragmatic, flexible and bounded by clear-eyed realism. The global financial order is evolving — but slowly and with considerable friction. The shift from sterling to the dollar took decades and two world wars. Even the EU, despite decades of political and economic integration and the introduction of the euro, continues to wrestle with internal divisions and incomplete fiscal unity. This ongoing struggle underscores how extraordinarily difficult it is to build a credible alternative currency system. The notion that a loosely stitched alliance of emerging economies can replicate such a transformation — absent deep coordination, robust institutions and global trust — is, at best, premature and, at worst, a triumph of hope over infrastructure. If BRICS truly wants to reshape the financial order, it must start by getting its own house in order. Until then, it will remain more a rhetorical vehicle than a real force for monetary transformation.
Yahoo
6 days ago
- Business
- Yahoo
Brazier: Stock-Bond Correlation Now 'Much Less Reliable'
Alex Brazier, investment and portfolio solutions global head at BlackRock, discusses portfolio diversification. "The stock-bond correlation now is much less reliable than it used to be," Brazier tells Bloomberg's Francine Lacqua. "Portfolios are shifting both from sort of 60/40 to be more 50/30/20 as you get more private markets and the investable universe expands," he adds. "Within the public market sleeve, people looking much more now at strategies that are market-neutral."
Bloomberg
6 days ago
- Business
- Bloomberg
Brazier: Stock-Bond Correlation Now 'Much Less Reliable'
Alex Brazier, investment and portfolio solutions global head at BlackRock, discusses portfolio diversification. "The stock-bond correlation now is much less reliable than it used to be," Brazier tells Bloomberg's Francine Lacqua. "Portfolios are shifting both from sort of 60/40 to be more 50/30/20 as you get more private markets and the investable universe expands," he adds. "Within the public market sleeve, people looking much more now at strategies that are market-neutral." (Source: Bloomberg)
Yahoo
25-06-2025
- Business
- Yahoo
China Seizes Moment to Globalize Yuan as Dollar Doubts Mount
(Bloomberg) — China is launching a sweeping campaign to promote the yuan's global role, seizing what officials see as a rare strategic opening. Bezos Wedding Draws Protests, Soul-Searching Over Tourism in Venice US Renters Face Storm of Rising Costs US State Budget Wounds Intensify From Trump, DOGE Policy Shifts Commuters Are Caught in Johannesburg's Taxi Feuds as Transit Lags With the dollar (DX=F) facing multiple challenges, Beijing is accelerating its long-standing campaign to reduce global reliance on the world's reserve currency. What sets the latest push apart is timing: Chinese policymakers see erratic US decision-making and geopolitical tensions as the most favorable backdrop in years to promote the yuan. The latest measures aim to not just facilitate trade but also open China's financial markets and embed the yuan more deeply in investment flows. They include easing capital controls, expanding cross-border payment systems, and launching new financial products to attract foreign investors. Beijing's hope is that a more internationalized yuan may reshape trade and global finance and challenge the dollar's dominance in reserve portfolios. 'The measures to further integrate China with the global financial system feel like steps in the right direction, as China wants to make sure that the yuan is in the conversation of important global currencies,' Lynn Song, chief Greater China economist at ING Bank NV, said. Role in Monetary System In a speech last week, Chinese central bank governor Pan Gongsheng envisioned a new global currency order with a reduced role for the dollar. He outlined a vision in which China's financial markets are more open and the yuan plays a central role in the world's capital flows. To push that vision, the People's Bank of China plans to establish an international operation center for the digital yuan in Shanghai. It's also exploring the launch of the country's first domestic currency futures, which could compete with similar hedging tools in offshore markets like Singapore and Chicago. In Hong Kong, a fast payment system was launched over the past weekend. It allows residents to wire payments in the yuan or Hong Kong dollar to the mainland for trade and services, further integrating the two markets. The city's exchange is also expected to add yuan-denominated counters to the southbound stock link. Crypto-currency linkages are on the table as well. Hong Kong's Secretary for Financial Services and the Treasury Christopher Hui said recently he won't rule out the possibility of linking stablecoins with the yuan, though he noted risks, exchange rates, monetary policy and other factors would have to be considered. His comments came after the US Senate passed legislation on a dollar-pegged stablecoin and Hong Kong's approval of its own stablecoin regulatory framework in May. China is also taking steps to further facilitate capital flows by opening more domestic trading products to foreign investors later this year. Authorities plan to raise quotas for local residents to invest their yuan in overseas securities, which would increase the currency's international circulation. 'China could be seizing the opportunity to promote RMB internationalization,' Xiaojia Zhi, an economist at Credit Agricole CIB said, adding further steps, such as deepening the offshore yuan liquidity pool, could sustain the momentum. China's own payment system, CIPS, is also gaining traction. It expanded recently to cover more foreign banks including United Overseas Bank, Bangkok Bank and First Abu Dhabi Bank. For the first time, CIPS' overseas participants cover offshore yuan centers in Africa, the Middle East, Central Asia and Singapore. These are set to increase yuan settlements in China's cross-border transactions, where the currency has already overtaken the dollar in recent years. While the Chinese currency still accounts for just 2.2% of global reserves, its share in China's cross-border transactions has already overtaken the dollar. In the nation's goods trade, yuan settlement stood at 26% in May and could rise to 40% by year-end, according to Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. Economic Headwinds Still, China faces challenges. An economic slowdown, deflationary pressures and lower bond yields have complicated efforts to push the yuan forward. 'On the fundamental level, wider international use of yuan rests on a robust economy and further progress in capital account convertibility,' Morgan Stanley economists led by Robin Xing wrote in a note last week. Inside Gap's Last-Ditch, Tariff-Addled Turnaround Push Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P. Sign in to access your portfolio
South China Morning Post
21-05-2025
- Business
- South China Morning Post
Singapore's central bank chief sees ‘no alternative' to US dollar assets despite downgrade
US dollar-based assets have 'enduring advantages' and remain virtually irreplaceable in the global financial system despite the United States losing its top triple-A credit rating, according to Singapore 's central bank chief. 'They are the dominant, safe assets for use in the financial system, deeply embedded,' Monetary Authority of Singapore Managing Director Chia Der Jiun said at the Qatar Economic Forum on Tuesday. 'The US$28-trillion Treasury market is fundamental and systemic to the global financial system and there is no alternative for this point.' Moody's Ratings last week stripped the US of its top credit rating , a landmark move that casts doubt on the nation's status as the world's highest-quality sovereign borrower. The headquarters of the Monetary Authority of Singapore, the city state's central bank. Photo: Reuters In lowering the US by one notch below the highest investment-grade position, the credit rater joins Fitch Ratings and S&P Global Ratings in downgrading the world's biggest economy. US long-dated debt initially sold off in response to the Moody's downgrade.
