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Xi Jinping and Vladimir Putin are leading efforts to knock the U.S. dollar down a peg.
With Russia as the current chair of BRICS, and the Kazan summit set for October 22, both leaders are pushing to replace the dollar in global trade.
The group (originally Brazil, Russia, India, China, and South Africa) will be joined by new members from Iran, Egypt, Ethiopia, and the UAE.
The goal is to increase financial cooperation and promote the use of local currencies in international trade. But let’s be honest, they might be getting in way over their heads.
Trade between Russia and China has surged. In 2023, it hit $227 billion, a 25% bump compared to previous years. Almost 90% of that trade was done in rubles or yuan.
But Xi, despite his big talk, is still stuck with the dollar in many ways. About 50% of China’s foreign reserves are held in U.S. dollars, which makes a full-blown de-dollarization effort pretty damn hard to pull off.
<h3 id="span-style-font-weight-400-the-de-dollarization-mission-is-not-doing-so-hot-span">The de-dollarization mission is not doing so hot</h3>
Putin has been diversifying Russia’s reserves, boosting its holdings in yuan. China, though, is playing a trickier game.
Its economy, at $18 trillion, dwarfs Russia’s $2 trillion economy, which makes this whole de-dollarization thing riskier for Beijing.
China’s reliance on the American market and investments means that switching to other currencies isn’t as easy as Putin’s playbook might suggest.
Analysts warn that Russia’s tactics may not work for China in the long run, and adopting them wholesale would be dangerous.
Xi is also trying to avoid getting crushed by U.S. sanctions. Rumors in Washington are that Chinese banks involved in transactions with Russia could soon be hit with sanctions.
Fearing a scenario similar to Russia’s, where sanctions crippled its access to global markets, China is trying to slowly reduce its exposure to dollar assets. But it’s a delicate balance. One wrong step and Xi is dragging the economy into a recession.
<h3 id="span-style-font-weight-400-it-s-not-so-simple-span">It’s not so simple</h3>
BRICS is exploring options like creating a shared currency or setting up a new payment system that doesn’t rely on SWIFT, which is the global banking network dominated by the U.S
But don’t hold your breath for any immediate change. Because let’s be real: the chances of BRICS pulling off a unified currency any time soon are slim to none.
The economic differences between members like South Africa and China are huge. In fact, the summit will likely focus on strengthening local currency use in trade between member countries. A common currency, though, is probably still a pipe dream.
BRICS countries are also targeting the energy sector. Saudi Arabia has already started selling more oil to China in renminbi rather than dollars.
That’s a big deal, but here’s the thing. The shift is happening faster with non-crude oil products. Crude oil itself is still mostly traded in dollars, and that’s not going to change overnight.
The liquidity and well-established practices in oil trading make it hard to dislodge the dollar’s role.
<h3 id="span-style-font-weight-400-the-almighty-dollar-isn-t-going-anywhere-yet-span">The ‘Almighty Dollar’ isn’t going anywhere — Yet</h3>
The dollar is still sitting pretty as the world’s top currency. The U.S. economy accounts for 26% of global GDP, and the size of the economy makes the dollar a go-to for international investors.
America also has something no other country can touch. And that’s confidence. Global investors see the dollar as a safe bet, especially when economic or geopolitical crises hit.
Right now, the dollar is the king of global trade. Commodities like oil are still mostly priced in dollars. There’s also the deep liquidity of U.S. markets, making it easier for investors to buy and sell dollar assets.
No other currency can touch the dollar on this front. Plus, it makes up about 64% of global foreign reserves, up from 49% in 2010.
U.S. Treasuries are widely considered the safest investments in the world. No other country has a bond market as big or as trusted as the U.S. This is why foreign governments hold onto dollar-denominated assets. Simply put, the U.S. dollar is a tough act to follow.
<h3 id="span-style-font-weight-400-the-geopolitical-chessboard-span">The geopolitical chessboard</h3>
Here’s where it gets messier. USD’s dominance allows America to wield massive geopolitical power. America can hit countries with sanctions that choke off access to the dollar-based financial system.
No serious alternatives have emerged. The euro? Nah, it’s too politically divided. The renminbi? China’s strict capital controls make it unattractive for global use. Bitcoin? Not yet.
But again, the member countries have different priorities, and this makes collective action tricky. A real move away from the dollar could even trigger economic retaliation from Washington. That’s a risk that BRICS will have to weigh carefully.
This is the most powerful country on earth. Putin likely knows better.
In the end, de-dollarization may sound like a great idea on paper, but the execution? Well, that’s a whole other story.

Xi and Putin might be way in over their heads with de-dollarization

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