BRICS summit: China, Brazil to start trading in own currencies

BRICS members China and Brazil today agreed to bring around $30 billion worth of their annual bilateral trade under their own currencies, so as to take about half of their bilateral trade exchanges out of the ambit of the US dollar.

The agreement, signed ahead of the start of the BRICS summit in Durban, South Africa, will initially be for a three-year period.

"Our interest is not to establish new relations with China, but to expand relations to be used in the case of turbulence in financial markets," Brazilian central bank governor Alexandre Tombini said after signing the agreement.

The trade and currency deal by two of BRICS largest economies is expected to be operational in the second half of 2013.

Bilateral trade between China and Brazil stood at around $75 billion in 2012.

The move by the two emerging economies could cause real changes to global trade flows, which is currently dominated by the dollar and the euro.

The fifth summit of the grouping of Brazil, Russia, India, China and South Africa (BRICS) also endorsed plans to create a foreign exchange reserves pool and an infrastructure bank.

"It's done," South Africa's trade minister Pravin Gordhan said after meeting with his BRICS counterparts.

"We made very good progress, the leaders will announce the details," he added.

The bank will focus on infrastructure financing, a role which the World Bank and the International Monetary Fund undertakes at present.

The World Bank and the IMF continue to be mainly Western institutions dominated by the US and Europe, although the BRICS account for 25 per cent of global GDP and 40 per cent of the world's population.