/ world today news/ “We are for the use of Chinese yuan in payments between Russia and the countries of Asia, Africa, Latin America”
On March 21, Russian President Vladimir Putin, in a meeting with Chinese President Xi Jinping, made a very important announcement: “We are in favor of using the Chinese yuan in payments between Russia and the countries of Asia, Africa and Latin America. I am sure that these forms of payment in yuan will be developed between the Russian partners and their partners in third countries.
In fact, it is a promise to render a very serious service to the Chinese side in promoting the yuan in the international arena. Over the past ten years, however, no other country has provided such support to the Chinese currency as the Russian Federation. First, in trade and economic relations between the two countries, Russia began to use the yuan (in exchange for the use of the Chinese side of the ruble); second, the Russian Federation included the Chinese currency in its international reserves.
The decision to include the yuan in international reserves was made by the Bank of Russia at the end of 2015, after the IMF decided to include the Chinese currency in the so-called SRT basket. This meant that the yuan was given official reserve currency status, which until then only the US dollar, the euro, the British pound sterling and the Japanese yen had.
However, although the yuan received the honorary title of “reserve currency”, it did not significantly affect the composition of the international reserves of most countries in the world. In 2016, according to the IMF, the share of the yuan in the total volume of international reserves of all countries was only 1.1% (the share of the US dollar was 64.0%). According to the latest data, as of October 1, 2022, the share of the yuan has risen to 2.9% (the share of the US dollar is 59.5%).
Russia most actively accumulated yuan as part of its gold-currency reserves. According to the latest open data from the Bank of Russia, as of mid-2021 the share of the yuan in the gold and foreign exchange assets of the Central Bank was 13.1% (the third largest component after the euro with a share of 32.3% and gold with a share of 21 .7%). In absolute terms, Russia’s yuan reserves in the middle of the previous year stood at $76.7 billion. That’s almost a quarter of the total yuan reserves of all the world’s central banks at that time.
We do not know how many Chinese yuan there are today in the foreign reserves of the Bank of Russia, the Central Bank has closed a significant part of its statistics. The other day he partially revealed these statistics, but information on the currency and national structure of international reserves is still closed. From indirect evidence, it can be assumed that in the thawed part of the foreign exchange reserves, the yuan is, if not the only, then the dominant currency.
As for the use of the yuan as a payment currency, the Bank of Russia has lifted the veil of secrecy here. In the Financial Markets Risk Review, she noted that in 2022, the yuan’s share of export payments in Russia increased from 0.5% to 16%, and the ruble’s share from 12% to 34%. Thus, the Russian and Chinese currencies took over half of Russia’s foreign trade payments. Undoubtedly, the quantum jump in the yuan indicator occurred due to the massive sanctions of the collective West against Russia after February 24, 2022.
The currency structure of import payments also changed significantly last year: the share of currencies of unfriendly countries (almost exclusively US dollar and euro) decreased from 65% (January 2022) to 46% (December). “The decrease in the share of toxic currencies is mainly due to the increase in the share of the yuan in settlements: during the year it increased from 4 to 23%. At the same time, the share of the ruble in import payments slightly decreased – from 29 to 27%, the share of currencies of other friendly countries at the beginning of 2023 amounted to 4%”noted in the Overview.
The International System for Banking Information Transfer and Payments (SWIFT) noted in its report that in August 2022, Russia became the third country in the world for offshore payments in yuan (passing outside the borders of the PRC). By the end of 2022, Russia’s share of yuan payments outside China has declined. At the end of December, it fell to sixth place with a share of 1.89%. However, in January 2023, Russia’s share of offshore settlements in yuan began to grow again and reached 2.57%, Russia climbed to fifth place in the SWIFT ranking.
As I have repeatedly written, the domestic foreign exchange market is actively exchanging toxic currencies (mainly the US dollar and the euro) with the currencies of friendly countries. Among the latter, the Chinese yuan clearly dominates. At the end of February, there was a slight sensation on the currency exchange of the Moscow Exchange: the Chinese yuan came out on top in terms of turnover, overtaking the US dollar. The yuan represents almost 40% of the total volume of trade with the main currencies (1.48 trillion rubles), the dollar – just over 38% (1.42 trillion rubles), the euro – 21.2% (0.79 trillion rubles). ). But already in February 2022, the positions of the American currency were dominant with a microscopic share of the Chinese currency: the dollar – 87.6%, the euro – 11.9%, the yuan – 0.32%. Experts called the change registered in February on the Moscow Stock Exchange a transition from dollarization to yuanization.
However, while the yuan has not become as much in demand by most legal entities and individuals of the Russian Federation as foreign currency, as the US dollar was until February 24 last year. The share of foreign currency funds of the population in bank deposits as of January 1 this year decreased to 11.2% against 19.9% a year earlier. The volume of household funds in Chinese yuan is growing, but, as the Bank of Russia notes, its share “on the scale of all the assets of individuals it remains insignificant”.
In a recent “Banking Sector” analytical overview (March 2023), the Central Bank notes that the share of foreign currency loans in dollars and euros in bank portfolios is decreasing, but the yuan is not filling the resulting niche. The role of the yuan in lending to Russian businesses is still small.
But back to the news I mentioned at the very beginning. The President of Russia proposed to accelerate the legalization of foreign economic relations of the Russian Federation. That is, to really assist in the fulfillment of the task set by the Chinese leadership in the early 2000s – to make the yuan a truly international currency.
V. Putin mentioned the countries of Asia, Africa, Latin America. Since the end of the last decade, Russia has been negotiating with these countries for the de-dollarization of foreign trade payments. The negotiations became more active after February 24 of this year. During these negotiations, however, it was about replacing US dollars, euros and other toxic currencies with national currencies. That is, with the Russian ruble and the currency of the respective partner country.
On March 21, Vladimir Putin proposed that toxic currencies in trade with third countries be replaced with the Chinese yuan. In fact, the president promised to promote the yuan on the world stage. Very expensive foreign exchange service to Beijing from Moscow. I hope that if there is a use of the yuan in Russia’s trade with third countries, it will not be at the expense of the ruble.
Translation: EU
Vote with ballot No. 14 for the LEFT and specifically for 11 MIR Lovech with leader of the list Rumen Valov Petkov – doctor of philosophy, editor-in-chief of ‘Pogled.Info’ and in 25 MIR-Sofia with preferential No. 105. Tell your friends in Lovech and Sofia who to support!?
Subscribe to our YouTube channel:
and for the channel or in Telegram:
#foreign #exchange #service #Beijing #Moscow
What are the potential economic implications for countries in Asia, Africa, and Latin America in adopting the Chinese yuan for trade with Russia?
1. What is the significance of Russian President Vladimir Putin’s announcement about using Chinese yuan for payments between Russia and countries in Asia, Africa, and Latin America?
2. How has Russia supported the promotion of the Chinese yuan over the past decade, and what role has it played in the international arena?
3. Has Russia’s inclusion of the yuan in its gold-currency reserves and use in foreign trade payments significantly impacted its share in the global economy and international markets?
4. What role does the International Monetary Fund (IMF) play in recognizing the Chinese yuan as a reserve currency, and how has this affected its acceptance worldwide?
5. How has the introduction and growth of offshore yuan payments in Russia influenced trade with friendly nations since the onset of Western sanctions?
6. Can Russian efforts to promote the yuan over US dollar and euro encourage other countries to adopt similar policies for de-dollarization purposes?
7. What potential challenges might arise for Russia in promoting the Chinese yuan as a global currency, especially given its current economic situation?
8. How might the use of the yuan impact Russian-Chinese relations, both economically and politically, in the long term?
