/ world today news/ More and more countries are using the yuan in trade and investors are actively investing in it. Russia is no exception. On the Moscow Stock Exchange, the US dollar was overtaken by the Chinese currency for the first time. About its prospects in the world economy – in the material.
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According to SWIFT, in July Russia became third in international payments in yuan, although it was seventh in June and tenth in May.
Since April, the volume of transactions has grown 6.3 times. The leader in this ranking is Hong Kong with 71% of transactions in Chinese currency. In second place is Great Britain. On the fourth – Singapore, on the fifth – the USA.
On the Moscow Stock Exchange, the yuan overtook the dollar. In February, transactions in Chinese currency did not exceed several hundred million rubles per day. Now there are 70 billion.
The sanctions affect exports and imports, analysts explain. Moscow shifted its focus to Asia and above all to China.
In seven months, trade with China reached $98 billion, according to the Central Administration of Customs of the Republic. The goal is two hundred billion a year.
Interest in the yuan is fueled by the Central Bank and the Ministry of Finance. According to media reports, there are plans to replace the euro and dollars in the National Welfare Fund with Chinese currency. The “piggy bank” will be replenished within the framework of the updated budget rule.
Alternatively, Indian Rupees, Turkish Liras are also considered. But they are still too fickle.
The central bank is ready to assist in any way to speed up de-dollarization. Foreign assets in dollars and euros have become risky for Russians. The regulator recommends converting savings into the currencies of “friendly” countries.
Banks increasingly charge a fee for holding “toxic” money. Depositors shift to yuan. Previously, no more than ten credit institutions offered such deposits in the country. Now it’s massive. Interest rates range from 0.1 to 3 percent per year with a minimum deposit of 1.5 thousand yuan for a period of one month to three years.
In addition, tourists from Russia in Asian countries use the Chinese payment system “Union Pay”. Through it, the conversion takes place directly. According to the Central Bank, the volume of transactions of citizens with the PRC currency has jumped more than 16 times.
As trade with China expands, large domestic issuers are entering the yuan-denominated bond market. At the end of July, Rusal’s bonds appeared on the Moscow Stock Exchange. Soon, Polyus issued 4.5 billion yuan worth of five-year bonds at 3.8 percent.
According to media reports, the Ministry of Finance is preparing to issue yuan-denominated government debt securities. Negotiations with Beijing are already underway.
It is likely that the release will be aimed not only at the domestic market, but also at foreign buyers. Russian investors will have to accumulate assets in correspondent accounts in Chinese banks, analysts say.
However, the Chinese are very careful with outside players. It is not yet clear whether an exception will be made for Russia.
Acceptance of yuan
China is the second largest economy in the world. International trade is increasingly turning to the Chinese currency.
Thus, in June, India paid for almost half of the exported Russian coal in yuan, Hong Kong dollars, UAE dirhams and euros.
The yuan is quite liquid and stable. Inflation in China is 2.7 percent on an annual basis (data for July). For comparison: in the US it is 8.5. In the Eurozone, in some countries it is even double-digit.
Only Japan, Indonesia and Switzerland still have inflation below five percent.
Sometimes the situation is close to disaster. In Turkey, prices have jumped by almost 80% in a year, in Argentina by 71%, in Africa even more.
But the yuan has its drawbacks. The exchange rate is controlled by the Central Bank, which ensures the competitiveness of Chinese goods in the world market. If necessary, the state intervenes and weakens the national currency.
In 2018, a trade war broke out between the US and China. Washington expected that after the tariff hike, importers would start looking for an alternative to China, and companies would stop opening factories there. But the White House miscalculated. Beijing simply devalued the yuan by 14 percent and maintained its lead in trade.
Also, the Chinese currency is not completely freely convertible. This creates certain risks.
It is therefore too early to dismiss the dollar and the euro. “Their positions are strong. Moreover, the Chinese authorities themselves are not interested in the yuan becoming a world reserve currency. This can dramatically increase its value, making many industries unprofitable,” explains Nikolay Pereslavskyi, an employee of the Center for Economic and Financial Research.
In addition, few people manage to give up the dollar quickly – they are all too tied to the US economy. The American currency represents 41 percent of international payments, the euro – 35.5 percent. The top three is closed by the British pound (6.45). The yuan has so far climbed to fifth place with 2.2%.
Translation: V. Sergeev
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