Xi Jinping lands in Delhi for BRICS Summit, to meet Modi

Chinese President Xi Jinping arrived in New Delhi on Saturday for the BRICS Summit and is scheduled to hold bilateral talks with Prime Minister Narendra Modi later in the evening.

The visit is Xi’s first to India in seven years. It comes as India and China cautiously rebuild ties that were badly damaged after a military clash along their disputed Himalayan border in 2020, in which 20 Indian and four Chinese soldiers were killed.

Xi stepped out of his plane to a red carpet welcome and was greeted by women performing traditional Indian dances.

The Xi-Modi meeting, scheduled for Saturday evening, will be their third in three years, a spokesperson for China’s foreign ministry said on Friday.

China “is willing” to work together with India, to view two-way relations from a strategic and long-term perspective, properly manage differences, and be “good neighbours and friends, as well as mutually supportive partners,” the spokesperson said.

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Xi is accompanied by a high-level delegation comprising government officials and top business leaders.

His visit follows a series of recent high-level exchanges, including the Special Representative dialogue in Beijing between National Security Advisor Ajit Doval and Chinese Foreign Minister Wang Yi, even as concerns linger over aggressive Chinese military posturing along the Arunachal Pradesh sector.

Both sides have rolled out a series of confidence-building measures over the past year to repair ties frayed by the more than four-and-a-half-year military standoff in eastern Ladakh.

BRICS includes Brazil, Russia, India, China and South Africa, Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates.

The summit is being held amid geopolitical tensions triggered by the U.S.-Israeli war with Iran, the Russia-Ukraine war and the disruption they have caused to global energy, trade and transport.

BRICS takes cautious approach to de-dollarisation

BRICS has spent years discussing ways to reduce dependence on the US dollar, but the formal position in a joint statement issued after a meeting of the bloc’s finance ministers and central bank governors remains cautious.

The statement makes no mention of a common BRICS currency or a formal call for replacing the US dollar. Instead, it focuses on interoperable payment systems, local-currency settlement and voluntary cooperation among members who “respect national priorities.”

The bloc acknowledged the efforts of the BRICS Payment Task Force (BPTF) towards exploring “pragmatic solutions for efficient cross-border payment mechanisms.”

Putin arrives in Delhi for BRICS summit

“We encourage the BPTF to continue discussions, building on the ongoing work, to facilitate practical solutions for cross-border payments among BRICS countries, which are fast, low-cost, more accessible, efficient, transparent, and safe.”

“We acknowledge the work done to study the cross-border interoperability of payment and messaging channels, and the discussions on promoting trade settlements and investments using BRICS local currencies, while respecting national priorities and acknowledging that there is no one-size-fits-all approach,” the joint statement issued after meeting of BRICS finance ministers and central bank governors in Mumbai ahead of the BRICS Summit said.

It also backed continued efforts by the New Development Bank (NDB) “to mobilise resources, expand local currency financing, strengthen project-preparation facilities, diversify funding sources, foster innovation, and support high-impact projects that contribute to inclusive and sustainable growth in member countries.”

The issue of de-dollarisation remained central to discussions at the BRICS Business Forum in New Delhi on Friday.

Iranian President Masoud Pezeshkian called for greater use of national currencies in trade among BRICS members and said the international financial system was vulnerable to political shocks.

“One of the most important steps is to expand the use of national currencies in trade among the members. This step must be accompanied by the establishment of the necessary instruments for managing currency risks and reciprocal settlements since the current financial system is vulnerable to political shocks due to its concentration on a limited number of currencies,” he said.

Ahead of the summit, Pezeshkian also said BRICS’ financial mechanisms could allow member countries to conduct economic interactions with less dependence on the dollar. He pointed specifically to the New Development Bank and said its financial capacity should help facilitate transactions among members without reliance on the US currency.

For Iran, the issue carries particular urgency. Tehran is under extensive US sanctions and sees greater use of national currencies, alternative payment mechanisms and BRICS institutions as a way of reducing exposure to financial restrictions imposed through the dollar-based system.

Russian President Vladimir Putin said attempts were being made to restrict international trade through sanctions, secondary sanctions and other measures. He argued that BRICS should build what he described as a “new, sustainable platform for global growth.”

Russia has a particularly strong incentive to develop financial channels outside Western systems after sanctions dramatically restricted its access to parts of the dollar- and euro-based financial architecture.

De-dollarisation would involve settling more bilateral trade in national currencies, linking or improving payment and messaging systems, reducing intermediaries in cross-border transactions, increasing local-currency financing by the New Development Bank, strengthening BRICS financial safety nets and developing guarantees and other instruments to mobilise private capital.

The joint statement explicitly asks the New Development Bank to expand local-currency financing and diversify its funding sources. It also supports the BRICS Multilateral Guarantees initiative, which is intended to improve project creditworthiness, lower financing costs and attract private capital into development projects.

However, replacing the dollar would be difficult if not impossible. The dollar’s position is underpinned by the depth and liquidity of US financial markets, its role in global trade and commodity pricing, and the size of dollar-denominated financial markets.

BRICS members also face obstacles. Their currencies are at different stages of internationalisation, many are not fully convertible, and trade between members is often heavily unbalanced.

These imbalances create a problem for local-currency trade: a country that accumulates another member’s currency needs somewhere to invest or spend those holdings. Without sufficiently deep markets, the transaction can ultimately require conversion into a third currency.

India has supported greater use of local currencies and more efficient cross-border payments. At the BRICS Business Forum on Friday, Commerce and Industry Minister Piyush Goyal called for BRICS countries to link payment systems and increase trade in local currencies, while highlighting India’s Unified Payments Interface as an example of payment infrastructure that could facilitate wider cross-border connectivity.

(With inputs from agencies)