BRICS Proposes $550 Billion Forex Swap with 29 Countries

China a BRICS member wants to encourage local currency exchanges worth $553.49 billion with 29 developing nations

China, one of the BRICS Push Currency Swap With 29 Countries Worth $550 Billion members, wants to encourage local currency exchanges worth 4 trillion Yuan, or $553.49 billion, with 29 developing nations. Because the bilateral currency swaps provide a safety net for all local currencies, they may make trade and investment opportunities easier.

For those unaware, currency swaps between central banks refer to financial arrangements that allow one nation to swap its currency for another. This keeps the option to use local currencies available at all times and helps central banks save money on exchange rate risks.

BRICS Pushes Currency Swap With 29 Countries Worth $550 Billion

Since local currencies will still be the primary medium of exchange for all transactions, the US dollar will not be used in any of the swaps. Put differently, central banks can transact billion-dollar deals, meaning their native currencies are “always trading” in the market. China is considering including all five of the BRICS countries in the currency exchange arrangement, as well as the other 29 countries.

Currency swaps will be a helpful addition to emergency liquidation during a financial crisis for BRICS and other emerging countries, according to Pan Gongsheng, Governor of the People’s Bank of China. He told Reuters, “Bilateral currency swaps can provide emergency liquidity support in times of turmoil in international financial markets and banking crises in some countries.”

The BRICS group is simultaneously trying to break away from the US dollar with the currency exchange. “A significant component of the international bailout relief package led by the IMF was China’s bilateral currency swaps with specific countries,” Gongsheng continued.