The Chinese currency, renminbi, is becoming a serious rival of the US dollar. Kazakhstan has already announced that it will consider using it as a reserve currency. China is actively working to introduce pure swaps (a type of foreign currency transactions) all over Southeast Asia. The Chinese currency is conquering more and more territory here and is even going beyond the region, notably, to Latin America.

At the end of March, China signed an agreement on using the renminbi in trade settlements with Argentina (to an amount of $10 billion or RMB70 b illion). More importantly, the BRICS summit passed decisions that have the potential of overhauling the structure of the global economy. Opening of mutual credit lines in national currencies and the principled decision to give up mutual settlements in US d ollars are yet another step towards ousting the American currency from the position of the world’s reserve unit.

The framework agreement on ending settlements in dollars on mutual loans and on p roviding loans in natural currencies was signed on the sid elines of the summit by head s of the development banks from Russia, China, India, Brazil and South Africa. The document does not offer a specific timeframe for giving up the dollar comp letely, but Vladimir Dmitriyev, chairman of the Russian Develop ment Bank, has already said that this year, Moscow would borrow at least $500 million worth from China in renminbi. “We have developed a mechanism with the State Development Bank of China that would allow using offshore renminbi for guaranteeing swaps in convertible currencies, therefore making borrowing cheaper,” he explained.

In practice, Russia and China have been going over to settlements in national currencies for two or three years already. In border regions, trade has been conducted for roub les and renminbi for a long time, and the fact that the Russian and Chinese Central Banks have signed an agreement on mutual p ure swaps means that Russian and Chinese businessmen that conclude deals with each other have received an opportunity to remove two transactions from their op erations, i.e. they do not need to convert the renminbi in d ollars and dollars in roubles, or v ice versa, which was the case earlier.

Let me add that Americans charge a percentage – even if a minor one – for each tr ansaction with their currency. In their best years, before the 2008 crisis, the windfalls from the use of the d ollar in the world reached as high as 4% of America’s GDP.

It is important to bear in mind that drastic changes in the currency system are not easy to make and they take some time. What is the most likely scenario in the changes of the glob al reserve system? First of all, it will be evolution, not revolution. Second, it will be a multi-currency system, with two or three currencies serving as reserves on the global level plus several regional currencies having the same function on the p eriphery of the global economy.

The medium-term forecast of the Russian financial system’s development in 2010-2015, which was prepared by the Institute of Financial and Economic Research, forecasts this gradual development for global currencies, with the share of the US dollar in settlements dropping and several regional currencies emerging.

It seems that the euro will remain a global currency alongside the dollar. In the CIS, the rouble could become a reserve currency. The prospects of the renminbi are very good. However, it is unlikely to replace the dollar in the near term, since it is still not a freely convertible currency and will hardly become such soon. Besides, China has a problem with tough administrative restrictions on foreign currency transactions and capital movements.

On the other hand, China has proved its ability to adjust flexibly to changing circumstances and to persistently move towards the goals it considers strategic. The forecast made by the OECD that by 2015, China will outrun the US for economic might and become a leading global power is of significant importance. Maintaining its current growth p ace, China will account for 23% of the glob al economy by 2030.

However, one cannot but agree with experts that say that the increasing complexity of the global economy as a system and acuteness of conflicts of interests require several reserve currencies and make it imp ossible to create a supranational reserve currency. What is needed is a free glob al currencies market and gradual strengthening of the international financial regulations. Only such a disperse system will be ab le to bear the requirements to liquidity of the global economy, which is multi-polar, extremely complicated, volatile (due to it being innovative) and requires free movement of cap ital and streamlining of markets.