In a statement released at a summit on the southern island of Hainan, the leaders of Brazil, Russia, India, China and South Africa said the recent financial crisis had exposed the inadequacies and deficiencies of the current monetary order, which has the dollar as its linchpin.
"The era demands that the BRICS countries strengthen dialogue and cooperation," Chinese President Hu Jintao said.
The BRICS are worried about the long-term fate of the dollar because of America’s large trade and budget deficits. They also begrudge the privileges that come with being the leading reserve currency — hence the call for a revamped system that is more stable.
In another dig at the dollar, the development banks of the five BRICS nations agreed in principle to establish mutual credit lines denominated in their local currencies, not the U.S. currency.
The leaders welcomed discussions about the global role of the Special Drawing Right, the International Monetary Fund’s in-house accounting unit and reserve asset, which some experts believe could grow into a partial substitute for the dollar.
But leaders stepped around the issue of whether China’s yuan should join the SDR, saying only that they welcomed discussion of the composition of the SDR’s basket of currencies.
A member-country official said the group was split on whether China’s currency, which cannot be freely exchanged except for trade and investment purposes, met the criteria for being part of the SDR.
"There is a need for a broad-basing of the international monetary system. The SDR is an instrument to do that, but we still have no unanimity on the inclusion of the Chinese currency in the SDR as of now," said the official, who declined to be identified.
The SDR now comprises the dollar, the euro, the Japanese yen and the British pound.
"India has said that the SDR is an accounting mechanism used by the IMF, and countries such as Brazil have also said that this (the yuan) should be convertible first," he added.
Though keen on a more diverse global monetary order, Beijing has given no indication that it is ready to make the yuan freely tradable or to dismantle capital controls as the price for the prestige of being part of the SDR.
The leaders, who met under tight security at a beach front hotel, issued a communique that touched on a wide range of issues but was short on specifics.
On the hot topic of capital flows, the BRICS called "for more attention" to the risks posed by massive cross-border flows of money but went no further.
The group said the world economy, of which its members make up nearly a fifth, was gradually recovering from the 2008 financial crisis but still faced uncertainties.
"The developments in west Asia and north Africa, and the aftermath of the huge tragedy that befell Japan, have introduced fresh uncertainties in the global recovery process," Indian Prime Minister Manmohan Singh said.
The main aim of the BRICS is to forge a common emerging-market negotiating stance on issues from climate change to world trade and to act as a counterweight to the West in settings such as the Group of 20 forum of advanced and developing economies.
"Our economic potential, political influence and our development prospects as an alliance are exceptional," Russian President Dmitry Medvedev said.
Swings in commodity prices are a prime area of concern for the BRICS. China is the world’s biggest importer of many commodities; the other BRICS members are major exporters of natural resources.
Excessive volatility, particularly in food and energy prices, posed new risks for the recovery of the world economy, the leaders said. The answer was to strengthen regulation of commodity derivatives so they did not destabilise prices and to work for balanced supply and demand in the physical markets.
China hopes the group will be able to agree on a common stance on commodity price fluctuations at the G20 summit in the French city of Cannes in November.
Thursday’s brief meeting was only the third BRICS summit and the first to include South Africa.
It brings together five countries that, though frequently united in their disinclination to do the West’s bidding, are a political and economic mosaic.
Brazil, India and South Africa are vibrant democracies, while China, now the world’s second-largest economy, is a Communist-ruled country with a low tolerance for political dissent.
China, Russia, India and Brazil have condemned the U.S.-led air strikes on Libyan forces.
South Africa, on the other hand, voted in favour of the United Nations Security Council resolution authorising the attacks. However, during a visit to Tripoli on Sunday, South African President Jacob Zuma called for NATO to halt its campaign.
Reconciling their differences, leaders on Thursday expressed deep concern over the turbulence in the Middle East and said they shared the principle that force should be avoided.
"They all condemned the bombings," said a government source who participated in the meeting.