SCO Photo:VCG

As a plan to boost national currency settlement among member countries of the Shanghai Cooperation Organisation (SCO) gained attention at the eighth Eastern Economic Forum (EEF), and the topic of de-dollarization was closely watched, Chinese observers following the meeting said that progress has been made in cutting reliance on the greenback, but the process will be a long one.

At the EEF on Monday, SCO Deputy Secretary-General Sohail Khan disclosed that the SCO has listed scaling-up local currency settlement among its member countries on its agenda, indicating progress toward a plan envisioned at the SCO Samarkand Summit in 2022, Russian news portal Sputnik reported on Monday.

Experts said the prospect of this endeavor still faces many hurdles but some pioneering moves should be discussed at an earlier time to reflect the common desire of a growing number of countries to reduce dependence on the US dollar amid Washington's weaponization of the major global reserve currency.

"For instance, China and Russia can discuss how China can pay for some of its oil and gas purchases from Russia in the ruble," Zhang Hong, an associate research fellow at the Institute of Russian, Eastern European and Central Asian Studies of the Chinese Academy of Social Sciences, told the Global Times on Tuesday.

Still, SCO member countries need to figure out how to cope with the issue of currency fluctuations, which are wide in some cases, Zhang said.

For a currency to be acceptable among trading partners, there needs to be some sort of guarantee, Zhang noted.

Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Tuesday that local currency settlement between China and Russia could serve as a reference point for other member countries within the SCO.

"The existing model of settlement between China and Russia is a precedent that offers insight on related technological issues and could be a reference point and then be promoted," Xi said. "However, a direct copy will likely fail, as other economies may not have the strong complementarity of the Chinese and Russian economies."

Experts pointed out that local currency settlement among SCO countries would take years to achieve, and it is essential to scale up trade and economic cooperation first, as the benefits of using local currencies would be minimal without scale.

Experts said the move by SCO member countries to explore local currency settlement is just one aspect of a broad de-dollarization move taken or pursued by a large number of countries, amid US moves to use the dollar as a weapon for geopolitical gains.

In an article "De-dollarization neither 'quick' nor 'easy,' but may succeed 'in future'," Sputnik cited a Philippine expert as saying that de-dollarization, despite facing many challenges, is viable.

Wang Wen, professor and executive dean of the Chongyang Institute for Financial Studies at Renmin University of China, said at the EEF that China and Russia have truly and substantially pushed forward a de-dollarization process in bilateral trade in the past three years, as over 60 percent of trade is now settled in local currencies as compared with 60-80 percent of trade being settled in dollars just five years ago.

Wang said it is impossible to end the US dollar's hegemony in one or two years, but Russia, China and other emerging economies are making contributions for the global trade and financial systems to become fairer and more equal. 

Yu Miaojie, the president of Liaoning University, said at the EEF that de-dollarization is a mega-trend as the US proportion of global GDP continues to decline.

The yuan and the currencies of other countries would have an expanding presence and more recognition in the international arena, Yu said.

Xi noted the SCO's goal to have more local currency settlement reflected a common desire of member countries to reduce their reliance on a single foreign currency, which may compromise their national security and independence. 

"Mechanisms, such as a multilateral currency settlement system, are also a prerequisite for local currency settlement to take off among SCO member countries," Xi said.

At the BRICS Summit in August, attendees stressed the importance of encouraging the use of local currencies in international trade and financial transactions among members of the group as well as their trading partners.

China-Russia trade could top $200 billion in 2023 for the first time, Russian President Vladimir Putin said at the 8th EEF, noting that bilateral trade had grown by about 30 percent on an annual basis during recent years. 

The EEF is a major Russian platform for promoting global and regional cooperation held in Vladivostok. This year's forum attracted some 7,000 participants.