China, Russia, India and Brazil, collectively known as the Bric countries, are holding their first formal summit in the Russian city of Yekaterinburg.
Brazil, Russia, India and China are considering buying each other’s bonds and swapping currencies to lessen dependence on the U.S. dollar.
The BRIC countries are among the biggest holders of U.S. Treasuries and have combined reserves of $2.8 trillion.
China, Russia and, to a lesser extent, Brazil have expressed a desire to see the dollar one day replaced as the world’s main trading currency.
And fears that these big holders of dollar assets may be looking to switch from the US currency have unsettled financial markets and US politicians.
Related article: Dollar slides after Russia comments, BRIC summit (Reuters)
The summit will be “a launch pad for our future talks,” Medvedev said at the start of the meeting. The talks would give the countries the opportunity to “implement new economic programs and reform international financial relations,” he said.
The Russian leader reiterated his intention to push for the creation of a “supranational currency” to challenge the dollar and encouraged China and called on other Shanghai group members to use each other’s currencies for trade.
“There can be no successful global currency system if the financial instruments that are used are denominated in only one currency,” Medvedev said. “Today this is the case and the currency is the dollar.”
International purchases of U.S. assets shrank between March and April as China, Japan, Russia and Brazil trimmed their holdings of Treasuries.
China cuts US Treasury bond holdings by US$4.4b
According to the data posted on the web site of the US Department of Treasury, China holds US$763.5 billion in US Treasury bonds by end of April, down by US$4.4 billion from previous month’s US$767.9 billion. This was the first time that China had decreased its US Treasury bond holdings this year.
Confirmed by Bloomberg:
Graph: Bloomberg News