The first shipment of feed corn imported by China from South Africa arrives at Machong Port of Guangdong Province on 4 May (XINHUA)

China and Brazil have agreed to trade in the Chinese currency renminbi and Brazilian real before the visit of Brazil’s President Luiz Inacio Lula da Silva to China. This shift away from the US dollar is regarded as pragmatic and rational in the face of the current global financial fiasco. Reports suggest that the BRICS countries (Brazil, Russia, India, China and South Africa) may need to provide an alternative and support a rebalancing of the financial system.

The current uncertain conditions have been caused by the blatant misuse of the dollar’s position as a global reserve currency by the US which has full authority and control over it. The lesson here is that no one country should have that kind of control over any reserve currency.

What is the real value of the dollar? This is the question that markets are asking. There is a growing consensus that the dominance of the dollar needs to end. The gross manipulation of the currency, which most financial and monetary indexes use as base value, is causing a loss of trust and faith in the dollar and the US government that manages it.

According to the IMF, the renminbi now ranks as the world’s fifth-largest reserve currency, with 2.69 percent of foreign exchange reserves held in the Chinese currency. The IMF has raised the weighting of the renminbi in the basket of currencies that make up the Special Drawing Rights by 1.36 percentage points to 12.28 percent, the third-largest weighting.

Using local currencies in international trade can reduce dependence on the US in international activities and avoid the risks of US financial sanctions. At the same time, the defects and systematic risks of US dollar-led international currency system are increasing, and more countries prefer a diversified international currency system. Against this background, an increasing number of countries are seeking to use the renminbi in international trade.

In December 2022, China established a renminbi clearing centre in Mauritius, the third one after South Africa and Zambia. Using renminbi in China-Africa trade can obviously lower trade risks. Renminbi will become one of the most important currencies in international trade.

As countries move to abandon the US dollar, a rebalancing of the trading matrix has been set in motion as international trade is being conducted bilaterally in local currencies. The currencies of the BRICS nations (which all begin with letter R) - renminbi, real, rouble, rupee and rand – have come into sharp focus.

These countries account for more than 40 percent of the world’s population with 3.2 billion people, the largest pool of human resources. The share of their combined GDP has grown to 31 percent and is expected to reach 50 percent of the world’s total by 2030. The land area is 40 million square km and is endowed with vast quantities of energy reserves, rich mineral deposits and large tracts of arable land.

The impact of the US dollar on the US itself is becoming clearer as more countries are choosing to support their local currencies and recalibrate its value accordingly. Americans are facing serious economic challenges as banks begin to fail and the false narrative of the US economy is exposed. It seems dedollarisation will lift the undue weight on many countries, inspire the creation of a fairer and more just system, and remove the self-imposed burden of responsibility on the US, releasing it to rediscover itself and setting a new course for the world economy.

The author is director of the Diplomatic Society in South Africa