Forbes India 15th Anniversary Special

China and Malaysia Consider Establishment of an Asian Monetary Fund to Reduce US Dollar Dependence

In March, China and Brazil reached an agreement to conduct transactions exclusively in their respective national currencies, eliminating the need for the US dollar

Shashank Bhardwaj
Published: Apr 6, 2023 12:31:31 PM IST
Updated: Apr 6, 2023 06:04:10 PM IST

China and Malaysia Consider Establishment of an Asian Monetary Fund to Reduce US Dollar DependenceImage: Shutterstock

China and Malaysia are contemplating advancing talks on creating an Asian Monetary Fund as the region prioritises reducing its dependence on the US dollar. 

According to reports on April 4, Malaysian Prime Minister Anwar Ibrahim stated that China was receptive to a proposition for establishing such a fund.

At a forum in Hainan, China, last week, the idea of creating an Asian-focused fund was introduced, as reported by Bloomberg. Malaysian Prime Minister Anwar Ibrahim stated that China's President Xi Jinping was open to talks about establishing an agency that would assist their countries and others in the region to lessen their reliance on the US dollar and the International Monetary Fund (IMF).

Several Asian countries, including Malaysia, are attempting to reduce their dependence on the US dollar. To achieve this, Malaysia's central bank is collaborating with China's People's Bank to engage in trade using their own currencies. 

In March, China and Brazil reached an agreement to conduct transactions exclusively in their respective national currencies, eliminating the need for the US dollar.

Back in the 1990s, there was talk of creating an Asian Monetary Fund, but Malaysian Prime Minister Anwar Ibrahim believes that now is the opportune moment to revisit the idea. He suggests that with the robust economies of China, Japan, and others in the region, they should at least discuss the potential for an Asian Monetary Fund, as well as using their respective currencies. 

Additionally, in late March, a Russian official spoke of a potential new currency for the BRICS alliance, which includes Brazil, Russia, India, China, and South Africa. This move would be another step towards reducing reliance on the US dollar.

In October 2022, Chinese government researchers suggested the creation of a digital currency backed by a basket of Asian currencies. On April 4, a columnist for the South China Morning Post, Alex Lo, proposed that there might be more reasons for countries to distance themselves from the US dollar, beyond economic motivations. 

According to Lo, more countries are looking to do so to avoid the US foreign policy's "gangsterism," which has increasingly utilised its global dollar dominance as a weapon over the past two decades.

If the US dollar were to lose its status as the world's reserve currency, it could have a significant impact on its value compared to other currencies and cryptos. This, in turn, could have a ripple effect on the $133 billion stablecoin market, where most stablecoins are pegged to the US dollar.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash

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