Malaysia Enlists China to Help End USD Dependence on Trade

As the region seeks to distance itself from US currency hegemony, China and Malaysia are considering the formation of an Asian Monetary Fund. Malaysian Prime Minister Anwar Ibrahim allegedly stated on April 4 that China was open to establishing an Asian Monetary Fund. According to Bloomberg, the idea for the Asian-focused fund was proposed at a gathering last week on the Chinese island province of Hainan.

According to Ibrahim, China’s President Xi Jinping welcomed negotiations on a new organization to assist the two countries – and others in the area – move away from the currency and the International Monetary Fund (IMF).

Malaysia is one of several Asian countries attempting to wean itself off the dollar. The central bank is collaborating with China’s People’s Bank to conduct trade in their respective currencies. China and Brazil decided in late March to conduct all transactions in their respective currencies, eliminating the use of the US dollar entirely.

An Asian Monetary Fund was first considered and proposed in the 1990s, but Ibrahim believes that the time has come to discuss it. “Now, with the strength of the economies in China, Japan, and others, I think we should discuss this — at least consider an Asian Monetary Fund, and, secondly, the use of our respective currencies,” he says.

According to Cointelegraph, a Russian state source also mentioned a new currency for the BRICS alliance in late March. It would be yet another attempt to break away from the dollar, embracing the expanding economies of Brazil, Russia, India, China, and South Africa.

Chinese government academics proposed a digital currency based on a basket of Asian currencies in October 2022.

On April 4, South China Morning Post columnist Alex Lo speculated that there could be further factors behind the dollar’s depreciation. According to Lo, more countries desire to ditch the US dollar not only for economic reasons but also to “escape the grips of the gangsterism of US foreign policy, which has militarized its global dollar domination with greater abandon in the last two decades.”

The dollar’s demise as the world’s reserve currency might significantly influence its value compared to other currencies and digital assets. That might have an impact on the $133 billion stablecoin market, which is dominated by stablecoins pegged to the US dollar.