Yuan increasingly preferred amid de-dollarization of China-Russia trade
Published: Feb 25, 2022 09:21 PM
A man takes a photo in the Red Square in Moscow, Russia, on Jan. 26, 2022.Photo:Xinhua

A man takes a photo in the Red Square in Moscow, Russia, on Jan. 26, 2022.Photo:Xinhua

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Wild swings in Russia's ruble over recent days amid its escalating tensions with Ukraine won't become a major cause of concern for China-Russia trade that has increasingly shifted toward settlement in the yuan amid a broad push for de-dollarization, experts said on Friday.

The yuan's rising profile in bilateral trade settlements is also seen as a cushion against financial sanctions confronting Russia, they noted. 

The ruble fell this week alongside the evolution of Russia-Ukraine tensions, tanking to a record low of nearly 90 per one US dollar on Thursday before recovering on Friday.

China's energy trade with Russia, a big part of bilateral imports and exports, is mostly settled in the dollar and increasingly in yuan, meaning fluctuations in the ruble, notably over the short run, aren't likely to rattle bilateral energy trade, Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Friday.

China's goods trade with Russia soared 35.9 percent to $146.87 billion in 2021, a record high, data from China's commerce ministry showed. China has remained Russia's top trading partner for 12 consecutive years.

China's energy imports from Russia surged 47.4 percent to 334.29 billion yuan ($52.93 billion) last year, or 65.3 percent of China's total Russia imports, according to Chinese official data.

The yuan accounts for over 17 percent of trade settlements between China and Russia and north of 12 percent of Russia's international reserves, the People's Daily said in a report earlier in February, citing central bank and customs statistics. 

The rise in yuan settlements for China-Russia trade also dampens fears over the fallout from the West's sanctions on Russia that could restrict its access to the dollar.

In a fresh sign of the growing preference toward the yuan, Gazprom Neft, the oil unit of Russian gas giant Gazprom, said it has become the first Russian company to entirely shift to yuan settlements for fueling planes within China, Sputnik News reported Friday.

Gazprom Neft also has plans to switch to yuan settlements on jet fuel in the ruble for Chinese airlines in Russian airports by the end of the year, according to the report.

Market watchers also downplayed fears of a prolonged plunge of the Russian currency, citing the Russian central bank's moves to stabilize the market.

With the Russian central bank moving to intervene in the market, the ruble has already seen signs of recovering, Tan Yaling, head of the China Forex Investment Research Institute, told the Global Times on Friday. 

The Bank of Russia vowed Thursday to "use all necessary instruments to maintain the financial stability and business continuity of financial institutions."

It also announced a ban on short sales in the exchange and over-the-counter markets, beginning Thursday.

In another sign of a turn for the better, the Russian stock market recovered some of its losses on Friday, after a hefty plunge the previous day.