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How the Chinese yuan is emerging in the financial architecture of the BRICS nations and what it means for the global reserve currency system
A shifting global currency order
The global financial system has long been anchored on the dominant role of the United States dollar (USD). Estimates suggest the dollar still accounts for roughly 60 percent of global foreign-exchange reserves and more than 80 percent of international trade invoicing. For decades, this dominance conferred benefits to the US in terms of cheaper borrowing, global financial influence, and the ability to project economic power.
Over recent years, however, the bloc of nations known as BRICS (Brazil, Russia, India, China and South Africa) has stepped up efforts to reduce dependency on the dollar. That ambition is taking multiple forms: settling trade in local currencies, building alternative payment systems, and exploring broader reserve-currency options. In this context the Chinese yuan (officially the renminbi) is central.
This article examines how the yuan is being promoted, especially by China, and the means by which the BRICS nations are attempting to shift away from dollar hegemony and the structural obstacles that remain.
Why the BRICS nations are looking for alternatives
The drive to move away from the dollar is rooted in several factors. First, the dollar system ties many emerging economies to the US monetary policy and its external impositions, including sanctions, which can penalise countries outside the Western financial orbit. For example, countries under US sanctions (notably Russia) view the dollar dependence as a vulnerability.
Second, using the dollar in trade between BRICS members imposes currency-conversion costs, exchange-risk and dependency on US-based infrastructure (such as the SWIFT network). Third, as China’s global trade and investment footprint has grown, Beijing has a strategic interest in internationalising its currency, the yuan, giving it more geopolitical as well as economic leverage.
As one commentary noted: “The renminbi is by far the most commonly used BRICS currency … policy efforts in 2023 signal Beijing’s aim to further grow the currency’s global use.”
Hence, the BRICS members are experimenting with local-currency settlement, currency-swaps, trade invoicing in non-dollar terms and even discussions of a common vehicle currency. These efforts are less about immediate dollar replacement, and more about reducing exposure to the USD in trade and finance.
The yuan’s growing role in BRICS trade
China has made tangible progress in promoting the yuan in BRICS and beyond. For example, trade between China and Brazil denominated in yuan has reached about US$80 billion, as Brazil and China shift soybean trade away from dollar settlement. Further, one source reports that payments in yuan among BRICS countries rose from 21.5 per cent in the second quarter of 2024 to 24 percent in the first quarter of 2025. That trend suggests a willingness by enterprises to settle in yuan rather than automatically defaulting to the dollar.
At the institutional level, the New Development Bank (NDB), a BRICS-formed multilateral bank, has indicated that it will increasingly finance in member-country currencies rather than defaulting to dollar funding. These developments show that the yuan is already carving out a more substantial role in the financial architecture of the emerging-economy bloc.
China’s strategic push: The “gold corridor” and trust mechanisms
One of the major barriers for any currency to challenge the dollar’s reserve status is trust. Countries need assurance that the currency is stable, convertible, reliably settlement-ready, and backed by credible reserves. China appears to be addressing that by deploying two inter-linked strategies.
First, Beijing has been promoting gold-backed settlement mechanisms to bolster trust in the yuan. Some analysts describe what is being called a “gold corridor” or global gold-vault network being built by China, vaults connected to the Shanghai Gold Exchange (SGE), each bar of gold tracked, serial-numbered, verifiable by sovereign participants.
The concept is that by linking the yuan to high-quality liquid assets (gold) and building a geographically distributed, auditable network of gold custody, China offers developing-country partners an alternative to trusting foreign banks or Western systems.
Second, China appears ready to tie this gold-backed infrastructure to financing for commodity-rich developing countries.
The idea: a country with gold deposits (for example South Africa, Venezuela or Guyana) could deposit gold into the vault network, then borrow yuan via the NDB or Chinese financial institutions, to fund infrastructure roads, power plants, ports, etc. bypassing the dollar and Western-dominated multilateral finance. Once implemented, this mechanism could strengthen the yuan’s role, increase China’s influence, and reduce participants’ reliance on the dollar system.
While this precise “gold-loan vs gold deposit to yuan” scheme remains at early stage and somewhat speculative, credible reports suggest that China is moving in this direction.
Limits and resistance: Why full replacement of the dollar is unlikely (for now)
Despite the momentum, significant structural impediments prevent a rapid shift from the dollar. First, even within the BRICS, the members are not aligned. For example, India has publicly stated that de-dollarisation is not currently part of its financial agenda and remains cautious about replacing the dollar entirely.
Second, the yuan is not yet fully convertible, and capital-account controls remain in place in China, meaning global market participants face limitations on freely buying or selling the yuan or shifting capital in and out.
Third, institutions such as the dollar-based system, global bond markets and current reserve-asset holdings are deeply entrenched; shifting those takes time, trust, and system-wide adjustments.
Fourth, some analysts argue the BRICS effort is more modest than the rhetoric: trade invoicing in local currencies is growing, but the creation of a fully-fledged BRICS common currency or an immediate dethroning of the dollar remains a distant prospect.
Implications for global finance and for developing countries
If the yuan continues to gain ground in international settlement systems, and if China’s structural infrastructure (gold-vault network plus settlement mechanisms) develops further, the international role of the yuan may expand significantly.
For developing countries with strong commodity or gold sectors, this presents an option: finance and settle trade in yuan, potentially reducing dependence on the dollar, lowering exposure to US sanctions or policy changes, and linking with Chinese infrastructure investment. That could alter the dynamics of global capital flows.
For China, this aids its goal of currency internationalisation, extends its financial network globally, and positions the yuan as a pillar of a multipolar financial architecture. For the rest of the world, particularly smaller economies, the adoption of yuan-settled trade or gold-backed yuan financing may offer flexibility, but it also introduces dependencies on Chinese financing and a currency still subject to Chinese policy priorities.
From a US-perspective the shift is noteworthy. Some US policymakers view the expanding role of the yuan and alternative settlement systems as a strategic challenge to dollar primacy and by extension to US financial leverage and the current international monetary order.
What to watch next
Several developments warrant close monitoring:
- The pace at which BRICS trade and settlement in yuan rises. Reports already suggest increases to about 24 percent in early 2025.
- Implementation of the gold-vault network and its linkage to yuan settlement and lending. If that becomes operational at scale, it could underpin the yuan with high-quality liquid assets (HQLA) and strengthen its reserve-asset credentials.
- Whether the NDB or other BRICS-institutions issue bonds, loans or financial instruments denominated in yuan, and whether they offer them to developing countries.
- Whether China eases convertibility of the yuan, loosens capital controls, and allows more international participation in its bond and currency markets, critical steps if the yuan is to become a broader reserve currency.
- The evolution of payment-system alternatives to SWIFT, such as China’s Cross-Border Inter-Bank Payment System (CIPS) or other BRICS platforms, which facilitate yuan-settled transactions
- The response from existing reserve-currency holders and the US dollar system will the shift provoke counter-measures, adjustments in alliances or policy changes.
Conclusion
The Chinese yuan is increasingly embedded in the BRICS strategy to reduce reliance on the US dollar. Through trade settlement, currency-swap agreements, and the emerging gold-vault infrastructure, China is creating the conditions for the yuan to play a greater international role.
Although the dollar remains deeply entrenched and the path to full substitution remains long, the current dynamics signal a meaningful shift in global currency architecture. Developing countries may find in the yuan a new settlement and financing option, while China advances its ambitions for currency internationalisation and financial influence.
For readers interested in global reserve-currency trends, the term “yuan” merits close attention. As the BRICS nations and China continue to build infrastructure, settle trade and shift their financial orientation, the yuan’s role in the international monetary system is poised to grow.
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