During the current meeting between Russian President Vladimir Putin and Chinese President Xi Jinping in Russia, Russia declared its move to use the Chinese renminbi as a settlement currency with Asian, African and Latam countries Putin has declared his intention to use the Chinese yuan as a settlement currency with Asian, African, and Latam countries. Putin declared that the use of the country’s currency for international transactions should be “further encouraged.”
Russia Declares Support for Use of Chinese Yuan in International Settlements
Russian President Vladimir Putin has spoken in favor of replacing the U.S. dollar as the currency to settle international payments. During a visit to Russia by Chinese President Xi Jinping, President Putin also expressed positive views on the use of the renminbi as a means of settlement in bilateral trade, especially with emerging economies.
Quoted by the TASS news agency, Putin said:
supports the use of the Chinese yuan for settlements between Russia and Asian, African, and Latin American countries.
Currently, two-thirds of commercial exchanges between Russia and China take place in their own currencies, but according to Putin, this needs to be further developed and a deeper level of integration of banking and market institutions in both countries should be pursued.
break away from the dollar
Russia is part of a global grouping seeking to move away from the U.S. dollar as part of bilateral and multilateral settlement arrangements.In August, the Society for Worldwide Interbank Financial Telecommunication (SWIFT)released datashowing that Russia is the third-largest market using the renminbi for global payments. At that time, the Chinese yuan also ranked fifth among the most used currencies for these payments.
However, analysts say that this figure could rise due to the new global configuration that the current conflict between Russia and Ukraine is causing in economic markets. Dong Denxin, director of the Institute of Finance and Securities Research at Wuhan University, said:
If sanctions against Russia continue, the share will keep increasing.
However, some believe that this reliance on the Chinese yuan may be detrimental to Russia in the long run. Alexandra Propopenko, an analyst at the Carnegie Endowment for International Peacewrites:
Russia is shifting from dependence on the dollar to dependence on the yuan. If relations with China deteriorate, Russia could face reserve losses and settlement disruptions.
Other groups have their own plans to move away from the dollar; the BRICS countries (of which Russia is one) are currently working on issuing their own reserve currencies. Also in January, Brazil and Argentina announced the creation of a common latam currency to be used for payments.