Former Finance Secretary Subhash Chandra Garg On BRICS’ Shift Towards China’s Yuan

India will host the BRICS Leaders’ Summit in New Delhi on September 12–13, with the government looking to raise the bloc’s profile and strengthen its role on the global stage.

As the BRICS summit gets underway in New Delhi, the push to de-dollarisation and reduce dependence on the US dollar is once again taking centre stage. BRICS countries have previously considered ways to reduce their reliance on dollar-based payment systems, including a proposal from Brazil to create a common currency for the bloc.

Meanwhile, de-dollarisation is once again in focus, as emerging economies increasingly seek to reduce their reliance on the US dollar for trade, investment and foreign-exchange reserves. However, the dollar continues to dominate global trade and reserve holdings by a wide margin.

China has also been stepping up its efforts to strengthen the yuan’s international role. On June 17, the governor of the People’s Bank of China announced a new roadmap that includes expanding offshore yuan trading and establishing additional currency swap arrangements with central banks, moves aimed at giving the yuan a bigger role in the global financial system.

In a conversation with Outlook, former Finance Secretary Subhash Chandra Garg was asked about the challenges India could face as BRICS pushes for greater use of local currencies. Given China’s already significant role in cross-border trade settlements through the yuan, he was asked whether a further shift toward local-currency trade within BRICS could unintentionally make the bloc too yuan-centric, rather than creating the genuinely multipolar financial system that members are seeking.

“China has an official Cross-Border Interbank Payment System called CIPS, which it uses to settle Chinese and Russian trade and payments. This bypasses the US-controlled SWIFT system. The settlement takes place by and large in Chinese Renminbi. Bilateral and international trade and payment systems require at least two parties to collaborate. India cannot create any rupee payment and settlement system on its own. Many other BRICS countries are gradually using the CIPS system. There is no way India can create any rupee-centric system in BRICS or with CHINA or Russia. As it cannot do it, there is no risk of the type you suspect,” Garg told Outlook.  

According to Garg, there is little realistic prospect of the Indian rupee emerging as a major international settlement currency alongside the yuan.

When asked whether BRICS’ push for local-currency settlement could help emerging economies reduce transaction costs and exchange-rate risks, or whether businesses would continue to prefer the dollar because of its deep liquidity, convertibility and well-established financial markets, Garg said, “As the Yuan is turning out to be a more stable currency than the US dollar and is being handled more maturely than the US dollar (see how Trump is destroying the US dollar), there might be an increasingly greater tendency among BRICS members and others to move towards CIPS.”

BRICS Payment System

BRICS has been exploring ways to reduce its dependence on dollar-based payment systems. Proposals have included BRICS Pay, connecting existing domestic payment networks such as India’s UPI, China’s CIPS and Brazil’s Pix, as well as the possible use of central bank digital currencies in the future.

The grouping began with the four BRIC countries holding their first summit in 2009, with South Africa joining a year later. Since then, BRICS has expanded into BRICS+, bringing in countries such as Egypt, Ethiopia, Indonesia, Iran and the UAE as part of a broader effort to represent the interests of the Global South.

China’s Yuan In Focus

In 2023, Chinese President Xi Jinping set out a vision for China to become a “strong financial power,” backed by a stronger yuan with a much wider role in global trade, investment and foreign-exchange markets. He also said the currency should eventually gain the status of a major global reserve currency.

Two years later, People’s Bank of China Governor Pan Gongsheng argued that the dominance of a single global currency can be turned into a geopolitical tool. He supported efforts to reduce the world’s “excessive reliance” on any one sovereign currency, reflecting China’s broader push to strengthen the yuan’s international role and diversify away from the dollar.

According to a report by the Peterson Institute for International Economics (PIIE), SWIFT is the main messaging network banks use to communicate about cross-border payments. However, sending a payment message is only part of the process. Banks also rely on clearing and settlement systems such as CIPS and CHATS to actually transfer and settle the money.

CIPS, China’s cross-border payment system, was launched in 2015 and soon integrated with SWIFT’s messaging network. It continues to use SWIFT for transactions involving its 1,619 indirect participants. Hong Kong’s CHATS, a real-time settlement system that handles several currencies, including the yuan and US dollar, also relies on SWIFT. Because these systems are interconnected, a single payment could involve SWIFT, CHATS and CIPS as it moves from a bank in one country through Hong Kong to a recipient in mainland China.

However, CIPS also operates its own messaging network for banks that participate directly in the system. This creates an important issue when measuring the yuan’s global use. If these banks continue to process the same, or even a larger, volume of yuan transactions but increasingly use CIPS’s own messaging system instead of SWIFT, those payments would no longer appear in SWIFT’s data, according to PIIE.

Looking at CIPS and SWIFT data together suggests that some transactions may indeed have shifted away from SWIFT. However, when CHATS is included in the comparison, the broader data still indicate that SWIFT’s reported decline in cross-border yuan activity is directionally accurate.

The growth of these alternative payment systems is nevertheless important. Between mid-2022 and mid-2024, payment volumes through both CIPS and CHATS more than doubled. CIPS volumes increased from roughly 350 billion yuan to 770 billion yuan, while CHATS volumes rose from around 1.5 trillion yuan to 3.3 trillion yuan, according to PIIE.

According to the Bank for International Settlements, the yuan’s share of global foreign-exchange transactions has risen sharply, from around 2% in 2013 to 8.5% by mid-June 2025. However, this growth has not come at the expense of the US dollar. Instead, the yuan’s gains have largely been made by taking market share from other currencies. Despite growing concerns over sanctions and efforts to reduce dependence on the dollar, the greenback’s share of global foreign-exchange transactions actually increased from 87% to 89%.

Bigger Question For India?

For India, the bigger question is not simply whether a new BRICS currency can be introduced, but what challenges the country would face in adopting it.

One major challenge is the possibility that political considerations could take priority over economic practicality. For instance, Russia may prefer using the Chinese renminbi for trade instead of the Indian rupee, despite existing rupee-rouble arrangements with India. Such competing interests could create disagreements within BRICS and make it harder to establish a coordinated system based on national currencies, let alone move toward a common currency.

Another concern is the growing economic weight of China within BRICS. If the bloc moves closer to a currency union-style arrangement, similar in some ways to the European Union, India could become more dependent on China. Greater trade liberalisation and lower tariffs among BRICS members could increase imports from China and widen India’s trade deficit.

Over time, deeper dependence on Chinese goods could also translate into greater Chinese influence over the bloc’s economic and trade policies. Instead of creating a genuinely multipolar financial system, BRICS could risk replacing one form of dominance with another.