China
Brics+ countries are determined to trade in their own currencies – but can it work?
Brics+ countries aim to increase local currency trade to reduce dependence on major currencies like the US dollar, lowering transaction costs and fostering economic growth while addressing financial sanctions challenges.
Brics+ countries are exploring how they can foster greater use of local currencies in their trade, instead of relying on a handful of major currencies, primarily the US dollar and the euro.
The forum for cooperation among nine leading emerging economies – Brazil, China, Egypt, Ethiopia, India, Iran, Russian Federation, South Africa, United Arab Emirates – emphasised this determination at their 16th summit in October 2024.
Economist Lauren Johnston recently wrote a paper on this development. The Conversation Africa asked her for her insights.
Why do Brics+ countries want to trade in local currencies?
There are economic and political reasons to use local currencies.
Using local currencies to trade among themselves will lower the transaction costs and reduce these countries’ dependence on foreign currencies.
Over the past few centuries, the world’s economy has developed in a way that makes certain currencies more valuable and widely trusted for international trade. These include the US dollar, the euro, the Japanese yen and the British pound. These currencies hold value around the world because they come from countries with strong economies and a long history of trading globally.
When people or countries trade using these currencies and end up collecting or holding them, they consider it “safe” because the value of these currencies remains stable and they can be easily used or exchanged anywhere in the world.
But for countries in the global south, like Ethiopia, whose currency (the birr) isn’t widely accepted outside its borders, trading is far more difficult. Yet these countries struggle to earn enough of the major currencies through exports to buy what they need on international markets and to repay their debts (which tend to be in those currencies). In turn, the necessity of trading in major currencies, or the inability to trade in them, can create challenges that slow down economic growth and development.
Therefore, even some trade in local currencies between Brics+ members will support growth and development.
Oil exporter Russia is a unique case. Though there are fewer foreign currency constraints overall, Russia faces extensive financial sanctions for its war of aggression against Ukraine. Using a variety of currencies in its foreign transactions may make it easier to get around these sanctions.
Politically, the reasons for using other currencies primarily relates to freedom from sanctions.
One of the tools for making sanctions work is an international payments systems known as Swift (Society for Worldwide Interbank Financial Telecommunication). Swift was founded in 1973 and is based in Belgium. It enables secure and standardised communication between financial institutions for international payments and transactions. And it’s almost the only way to do this.
It was first used to impose financial sanctions on Iran in 2012, and has since been used to impose sanctions on Russia and North Korea.
If a country is cut off from Swift, it faces disruptions in international trade and financial transactions, as banks struggle to process payments. This can lead to economic isolation and challenges in accessing global markets.
The reality, and possibility, of exclusion from Swift’s payments system is one of the factors galvanising momentum towards a new payments system that also relies less on the currencies of the countries that govern Swift – like the euro, Japanese yen, British pound and US dollar.
What are the likely challenges they will face?
The Brics+ plan to use local currencies faces some hurdles.
The central problem is the lack of demand for most currencies internationally. And it’s hard to supplant the international role of existing major currencies.
If, for example, India accumulates Ethiopian birr, it can mainly only use them in trade with Ethiopia, and nowhere else. Or, if Russia allows India to buy oil in rupees, what will it do with those rupees?
Since most countries seeking alternatives to dollar dependence tend to sell more than they buy from other countries, or are lower-income importers, they must consider what currencies to accumulate via trade.
When it comes to payment systems, at least, alternatives are emerging.
Brics+ is creating its own, Brics+ Clear. Some 160 countries have signed up to using the system. China also has its own, Cross-border Inter-bank Payment System, which broadly works the same way as Swift.
There’s a risk, though, that these payment methods could merely fragment the system and make it even more costly and less efficient.
Has trading in local currencies been done elsewhere?
Not all trade is done in major western currencies.
For example, in southern Africa, within the Southern African Customs Union, the South African rand plays a relatively important role in cross-border trade and finance. Just as in south-east Asia the currencies of Singapore and Thailand compete to be the dominant currency in the sub-region.
China – the world’s biggest exporter and producer of industrialised goods – is also signing bilateral currency swap agreements with countries. The goal is greater use of the renminbi in the world.
As a means of circumventing sanctions, India and Russia recently trialled using the rupee to trade. Russia’s oil exports to and through India have risen strongly since the Ukraine war and some 90% of that bilateral trade takes place in the rupee and rouble. This leaves Russia with a challenge – what to do with all the rupees it has accumulated. These deposits are sitting in Indian banks and being invested in local shares and other assets.
Another example of efforts to side-step major international currencies is China’s model of “barter trade”. The model works like this: China exports, for instance, agricultural machinery to an African country and receives payment in that country’s currency. China then uses that currency to buy goods from the same country, which are then imported back to China. After these goods are sold in China, the Chinese trader is paid in renminbi.
Ghana is one country involved in this barter model. Challenges facing the model include the digitisation of payments and trade, and trust – high levels are needed to establish and maintain relationships between trading parties as individuals and as businesses. It also requires some level of centralisation and coordination, but lacks strong laws, regulations and industry standards. This means that different platforms and enterprises may not be compatible, which can add to transaction time and costs.
Another example is when Chinese investors in Ethiopia make profits in birr. They use these birr to buy Ethiopian goods, like coffee, and export the goods to China. In China, when they sell these goods, they receive renminbi. So they transfer their profits from Ethiopia to China by increasing Ethiopia’s exports to China.
Anecdotal reports suggest this is feasible at a small scale but has relatively high coordination costs.
There could be other challenges. For example, if Chinese buyers pay Ethiopian coffee farmers in their local currency, instead of US dollars, it could lead to fewer dollars being available overall. Some international transactions still rely heavily on dollars.
How should Brics+ nations structure their arrangement?
There is no simple, or easily scalable, solution to moving past the reliance on major international currencies or circumventing Swift.
A fast, digital payment system is needed. This system would calculate and balance currency demand efficiently. It must also be reliable, replace parts of the current system, and not create extra costs for countries that aren’t using it yet.
Although some Brics+ members, like Russia, may have more interest in fast-tracking change, this may be less in the interest of other Brics+ members. A move away from Swift, for instance, requires buy-in from local financial institutions, and those in African countries may not be under pressure to shift to a new lesser-known platform.
Given these challenges, I argue that Brics+ should progress incrementally. What can happen soon, though, is to conduct some trade in local currency.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
Business
China’s Sany Heavy Contemplates Selling Stake in Indian Operations – MSN
China’s Sany Heavy is contemplating selling a stake in its Indian operations, signaling a potential strategic shift in its business approach within the country.
Sany Heavy’s Strategic Move
China’s Sany Heavy Industries is contemplating a stake sale in its Indian operations. This decision aligns with the company’s strategy to streamline its business and enhance operational efficiency in the competitive Indian market.
Implications for India’s Construction Sector
The potential stake sale could significantly impact India’s construction machinery landscape, as Sany is a prominent player in this sector. Investors are closely monitoring the situation, which could lead to increased capital infusion into the market.
Future Prospects
If the stake sale proceeds, it may open up opportunities for new partnerships and investments in the Indian construction industry. Sany’s decision reflects broader trends of foreign companies reassessing their positions in India’s evolving market.
Source : China’s Sany Heavy is considering stake sale in India business – MSN
China
2025 Guide to Accounting and Auditing in China – New Release from China Briefing
China’s new year demands foreign companies navigate complex compliance and financial reporting processes. The updated “Guide to Accounting and Audit in China 2025” aids executives by detailing recent accounting changes, personal information protection audits, tax health checks, and HR audits to ensure compliance.
The start of a new year is a hectic time for foreign companies in China. To meet the various compliance deadlines throughout the year, they need to begin the long and complicated financial reporting process, months in advance. Failure to comply will risk them being hit with deteriorating credit, additional fines, and penalties, and such companies might not be able to remit their profits overseas.
China Briefing’s Guide to Accounting and Audit in China 2025 (3rd Edition), produced in collaboration with the audit experts at Dezan Shira & Associates, aims to walk foreign businesses through the annual audit and compliance process from start to finish, in addition to introducing China’s accounting framework in a comparative context. We hope this guide helps your business add value to its annual statutory audit and compliance reporting in China.
The guide covers the following:
This practical and easy-to-understand guidebook will be of invaluable use to all executives involved in handling company finances concerning China, including:
In this year’s updated version of Guide to Accounting and Audit in China, there are notable changes that require your attention:
New changes to China’s accounting system: In 2024, China made several significant changes to its accounting system, including the amended Accounting Law, the Interim Provisions on Accounting Treatment of Enterprise Data Resources, Interpretation No. 17 on the Accounting Standards for Business Enterprises, and updates to the International Financial Reporting Standards and the Accounting System for Non-governmental Non-profit Organizations. We have updated the section “New Changes to China’s Accounting System” to reflect these changes and provide practical advice to help businesses prepare.
Legislative developments in personal information protection audits: Following the release of the Draft Measures for the Management of Personal Information Protection Compliance Audits in 2023, the National Information Security Standardization Technical Committee issued the national standard Data Security Technology – Personal Information Protection Compliance Audit Requirements (Draft for Comments) in July 2024. The Network Data Security Management Regulations, published on September 24, 2024, and effective from January 1, 2025, reaffirm the legal obligation for enterprises to conduct personal information protection compliance audits. However, as of this guide production, the draft measures and standards have not been formally adopted, and most enterprises are still in a wait-and-see mode. We have reflected these developments in the “Other Types of Special Purpose Reviews” section.
Tax health check: With tax compliance becoming more prominent in China, tax health checks, conducted either independently or by engaging professional institutions, have become a popular way for businesses to identify and correct non-compliance issues in their tax handling. This reduces the risk of tax penalties and avoids potential financial and reputational losses. We have included a general overview of the tax health check in the “Other Types of Special Purpose Reviews” section.
Human resources and payroll audit: An HR audit can uncover hidden HR-related problems and errors, as well as potential compliance issues, especially given China’s ever-evolving regulations. This enables organizations to establish best practices, thereby mitigating operational and legal risks. We have added a brief introduction to this type of special-purpose audit, including the suggested frequency and methods.
| This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to info@dezshira.com for more support. |
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China
Trump wants China’s help in making peace in Ukraine – he’s unlikely to get it
Trump invited Xi Jinping to his inauguration, aiming to involve China in Ukraine ceasefire talks. However, China’s support for Russia complicates its willingness to assist in negotiations, benefiting from ongoing conflict.
US president-elect Donald Trump has invited China’s president Xi Jinping to his inauguration on January 20 in a surprise move which appears to be part of a plan to involve Beijing in ceasefire negotiations in Ukraine.
Just after his recent meeting with Ukrainian president Volodymyr Zelensky in Paris, Trump posted, “There should be an immediate ceasefire and negotiations should begin,” and “China can help.” That latter remark has suddenly gained more significance after Trump extended the unusual invitation for the foreign leader to attend the January 20 ceremony.
Leaving aside whether Xi will accept Trump’s invitation to Washington DC (he probably won’t), the more important question is whether he would indeed help Trump end the Russian war against Ukraine.
China has had a strong economic and trading relationship with Russia throughout the war, and has refrained from criticising Putin. While it has denied providing Moscow with military assistance, reports suggest that China has allowed some goods that have battlefield use to be sent to Russia.
On the surface, Trump’s initiative and what China has most recently put on the table with Brazil look like two reasonably well-alligned peace proposals.
Both call for a ceasefire along the current frontlines, followed by negotiations on a permanent settlement. Both seem to accept Russia’s demand to freeze the territorial status quo, which would mean Ukraine would lose the near-20% of its territory that Moscow’s forces have illegally occupied since 2014.
Kyiv and Beijing
Ukraine and most of its western partners continue to reject this as unacceptable. Before Trump’s election victory, this was a sustainable position because the west was able to prevent Ukraine from being militarily defeated on the battlefield.
Trump has invited Xi Jingping to his inauguration.
This position may be slowly changing, but it is not clear that it would suddenly make China a welcome partner for the west in any peace negotiations – least of all for Ukraine.
Kyiv has always been wary of China and its international policies, from the economic and trade Belt and Road Initiative to the recent peace proposal. Zelensky called the China-Brazil peace initiative “destructive”. He also accused China and Brazil of being “pro-Russian”.
Zelensky is personally deeply invested in his own peace plan, particularly as Ukrainians have made enormous sacrifices in the war so far. This does not rule out compromises, but it makes concessions to China, widely seen by Ukrainians as one of Russia’s main supporters in the war, very unlikely.
Even if there was a sudden change of heart in Kyiv, it is highly doubtful that a Trump-brokered deal would serve Beijing’s interests. For Xi it is always about strengthening China’s role and influence as a global power. China will be concerned if the war is over, the US may become even more focused on its trade war with Beijing.
Read more:
Why China is worried about a second Trump presidency – and how Beijing might react
So far, the war in Ukraine has allowed China to benefit from the strain that it has put on the west.
US suggestions that it will pull back on its alliance commitments in Europe have raised doubts over the dependability of the US as an ally for Ukraine. This is becoming more acute as Trump prepares to move into the White House.
The longer the war in Ukraine continues in this way, the longer China will reap the benefits from the reduction of the relative weight of the United States as its main geopolitical and geo-economic rival.
A carefully managed continuation of the war against Ukraine, by contrast, benefits China in asserting its global leadership.
China’s approach to managing the “Ukraine crisis” was reiterarated by Xi at the recent Brics summit in Kazan, Russia, and in a meeting with former Russian president Dmitry Medvedev in Beijing on December 12 2024. It is focused on upholding “three key principles: no expansion of the battlefields, no escalation of hostilities, and no fanning flames, and [striving] for swift deescalation of the situation”.
What’s in it for China?
This is a far cry from an end to the war as envisaged by Trump. A Trump-brokered deal would likely lift sanctions and provide a possibility of renewed, more cooperative relations between the west and Russia.
It would significantly strengthen Putin’s position, contribute to Russia’s international rehabilitation, reduce his country’s dependence on China, and potentially rekindle historical Russia-China rivalries. Trump’s claim that he wants to “un-unite” Russia and China will not have gone unnoticed in Beijing.
And even if Trump did not manage to drive a wedge between Russia and China, a stronger Kremlin would mean a shift of the power dynamic in the partnership between Moscow and Beijing, potentially elevating Putin from a junior partner to Xi’s peer.
From a Chinese perspective, helping Trump to broker a deal between Russia and Ukraine offers few incentives, except potentially toning down the US trade and tariffs war against it. Draining the west’s resources in defending Ukraine keeps it away from the Indo-Pacific region in which most of the competition between China and the US will play out.
Xi has no interest in seeing Putin being strategically defeated in Ukraine, but keeping Russia bogged down in its war against Ukraine will ensure that the partnership between Beijing and Moscow will stay on current terms with the balance of power tilted towards China.
Keeping the war in Ukraine going, rather than helping Trump to end it, therefore is the most likely choice that Beijing will make.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
- China’s Sany Heavy Contemplates Selling Stake in Indian Operations – MSN
- 2025 Guide to Accounting and Auditing in China – New Release from China Briefing
- Trump wants China’s help in making peace in Ukraine – he’s unlikely to get it
- Trump Proposes 10% Tariff on China and Contemplates EU Tariff Measures
- Middle-Ground Trade Policies with China: Essential for Global Growth
- China Reports Agreement on Ceasefire between Myanmar’s Factions
