Not only will the US dollar be challenged, but also the entire international financial regime – led by the World Bank and the International Monetary Fund – which has been dominant since the end of World War II.
South Africa’s place in the emerging international financial regime is set to be enhanced.
Zou Lixing, vice-president of the Institute of Research of the China Development Bank, told the Brics preparatory meeting recently that “although the economic aggregate of South Africa is small relative to the Brics, South Africa provides a gate for the Brics to get access to the huge African market”.
The five-member nations have collectively called for an end to the tacit agreement between the US and Europe that ensures that the head of the World Bank is an American citizen, and the International Monetary Fund head is European.
They have proposed that an emerging market candidate be fielded when the term of the current World Bank head, Robert Zoellick, expires in three months.
Fundacao Vargas, a member of the Brazilian delegation, said Brics could confront “existing governance structures”, and seek to strengthen the blocs’ influence in established institutions like the World Bank and the International Monetary Fund, while creating alternatives.
The demand for greater political say in international affairs dovetails with China’s expected rise as a financial superpower in the next eight years.
Vargas showed the preparatory meeting projections indicating that China’s economy will have eclipsed that of the US by 2020, hence the promotion of the renminbi as the preferred currency of the south.
The renminbi has traditionally traded at a deliberately lower exchange rate, which gave a huge boost to China’s domestic economic sectors and enabled its booming industrialisation and growth.
The US and other trading partners have long accused China of being a “currency manipulator”.
Last week, Brazil declared its commitment to keep its own currency – the real – low. Its finance minister, Guido Mantega, reiterated his November 2010 declaration that a global currency war has broken out.
He said: “We do not want to lose our manufacturing sector.
We will not sit back and watch while other countries devalue their currencies.”
Brazil and China cried foul last year when, through a slew of initiatives dubbed QE2 – Quantitative Easing Two – the US indirectly devalued its currency by pumping about $600 billion into its economy to protect the economy from sliding back into recession.
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