Moving Away from a Dollar Dominated International Monetary and Financial System? The BRICS Grouping as an Arena to Promote the e-CNY

How can China leverage the BRICS grouping as an arena to promote the e-CNY? This chapter analyses the effects of the creation of China’s Central Bank Digital Currency (CBDC), the e-CNY, on the International Monetary and Financial System (IMFS) dominated by the dollar. It focuses on how China can leverage the BRICS grouping, its institutions and sub-BRICS dynamics as spaces to promote the international use of the digital format of its domestic currency. The underlying assumption of this chapter is that, similar to the Belt and Road Initiative (BRI), the Asian Infrastructure and Investment Bank (AIIB) and the Shanghai Cooperation Organisation (SRO), the BRICS grouping is a strategic arena to China to promote alternative spaces to the US dominance. The desire to move away from a dollar dominated IMFS is shared among all BRICS members, who have boosted the use of their local currencies in mutual trade and have worked on strategies to reduce their dependence on the US dollar. These initiatives originated in the context of the 2007–2009 Global Financial Crisis (GFC), gained new impetus with the 2020 COVID-19 related economic crisis and, more intensely, after the US financial sanctions imposed on Russia in the wake of the Ukraine war. The launch of the e-CNY brings new contours to these proposals. While all predictions about the demise of the dollar centric IMFS were proven inaccurate hitherto, the case of China’s CBDC is unique in comparison to previous contenders in several ways: (i) among all CBDCs projects, the People’s Bank of China large-scale pilot stands out, with 261 million users; (ii) the launch of the e-CNY is taking place in the context of heightened geopolitical conflicts between China and the United States; (iii) discontentment with a dollar centric IMFS has grown since the GFC, especially among rising powers, including the BRICS countries; and (iv) the Chinese RMB has been in all probability the greatest contender to challenge the dollar’s supremacy. Building on an analytical framework that stresses the fundamental place of structural power and currency hierarchy, this chapter argues that China’s digital currency in itself is not a factor that threatens the dollar dominated IMFS. Yet, promoting the use of the e-CNY within the BRICS grouping could contribute to increase China’s structural power in the monetary and financial realms, which in medium to long term could lead to a transformation of the status quo.