Russia Ready to Switch to Yuan in Foreign Trade.

Russian President Vladimir Putin recently stated that Russia is prepared to use the yuan in foreign trade settlements with Asian, Latin American, and African countries. During a meeting with Chinese leader Xi Jinping, Putin expressed his support for the use of Chinese yuan in settlements between Russia and its trading partners. He also highlighted the importance of using national currencies in mutual trade, which would further encourage the practice and expand the mutual presence of financial and banking structures in the markets of their respective countries.

 

JUST IN: Putin told Xi that Russia is prepared to switch to the yuan in foreign trade. pic.twitter.com/zeZUe5nZ1k

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The shift to the yuan comes at a time when Russia has been discussing a de-dollarization program for the economy and foreign trade in recent years. The plan, which was submitted to the government in 2018, proposed shifting foreign trade to Russian roubles and other national currencies. Russian authorities cited the threat of sanctions as one of the reasons for shifting away from US dollars in foreign trade calculations.

 

The share of the yuan in Russia’s export payments increased from 0.5% to 16% in 2022, while the share of the ruble rose from 12% to 34%, according to the Central Bank of the Russian Federation. This shift occurred against the backdrop of widespread sanctions imposed in the aftermath of Russia’s invasion of Ukraine. In August 2022, Russia was ranked third in the world in terms of yuan offshore payments.

The shift to yuan settlements may have several advantages for Russia. For starters, it would reduce its reliance on the US dollar, which has long been the dominant currency in global trade. Second, it would assist Russia in avoiding the effects of US sanctions imposed on its economy since 2014. Finally, it could strengthen its economic ties with China, which has become a key trading partner for Russia.

 

However, the shift towards yuan settlements also poses some risks for Russia. The yuan is not yet a fully convertible currency, and the Chinese government controls its value. Because of this, Russia will have to rely on China’s monetary policies, which will be difficult if China decides to devalue its currency. Switching to yuan settlements could also pose a challenge to Russia’s financial institutions, which are not yet fully prepared to handle large-scale transactions in yuan.

 

The announcement of Russia’s readiness to switch to the yuan in foreign trade settlements is a significant development that could have far-reaching implications for global trade. While the shift to yuan settlements may have several advantages for Russia, it also has some drawbacks. Finally, it remains to be seen how successful Russia’s shift to yuan settlements will be and how it will affect its trading relationships.