Indian cement factory’s trade settlement using yuan welcomed: experts
Published: Jun 30, 2022 09:10 PM


Indian company UltraTech Cement is reportedly using the Chinese yuan to settle payments with a Russian business partner, a move hailed by Chinese experts as boosting the yuan's global clout.

UltraTech is importing "157,000 tons of coal from Russian producer SUEK that is loaded on the bulk carrier MV Mangas from the Russian Far East port of Vanino," an Indian customs document reviewed by Reuters shows, while the settlement currency is in yuan, with the total cargo valued at 172,652,900 yuan ($25.81 million).

"The cargo's sale was arranged by SUEK's Dubai-based unit," and other companies have also placed orders using yuan payments for Russian coal, Reuters said, citing unnamed sources close to the matter.

Neither UltraTech nor SUEK responded to the Global Times' request for comment as of press time.

Chinese experts welcomed the move. While Reuters said it is "rare" to use the yuan for trade settlement from countries other than China, experts are not surprised, since the yuan has increasingly become a good and reliable alternative to the US dollar.

"Using the yuan for international trade settlement is nothing to be surprised about, since the yuan's internationalization is a market-driven trend, which comes along with the rising international trade and economic status of the country," Zhao Xijun, co-director of the Capital Market Research Institute at Renmin University of China, told the Global Times on Thursday.

The internationalization of the yuan comes as the dominance of the US dollar weakens, ignited by the US' relentless wielding of the stick of economic coercion and the dollar hegemony on the international stage to serve its own interests, Zhao said.

Before the US sanctions against Russia, the bulk commodities trade between India and Russia was mainly settled with the US dollar, but the situation changed after the US barred Russia from the SWIFT system. Countries trading with Russia such as India must come up with a currency that both are able to accept in order to sustain normal trade activities and the yuan is a good alternative, experts said.

"According to a March survey conducted by Russian financial daily Kommersant, large banks have seen a spike in funds being converted from dollars and euros into yuan. New accounts are also being opened with yuan," Business Insider reported in April.

"Under the conditions of restrictions, many companies see settlements in yuan as more stable and predictable," MTS Bank told Kommersant, according to the April report.

Researchers at Citi Private Bank said that with the continuous advancement of yuan internationalization, the proportion of yuan in foreign exchange reserves will increase, and the yuan exchange rate may be further stabilized in the medium and long term, Shanghai Securities News reported on June 25.

There is also "no problem at the technical level", as China and the former Soviet Union already used each other's banks for trade settlement in the 1960s. But clearing and settlement are much simpler and efficient now aided with the internet, Dong Dengxin, director of the Finance and Securities Institute of the Wuhan University of Science and Technology, told the Global Times.

Some experts advocate establishing an alliance for local currency settlement among China, Russia and India to completely replace the dollar in tripartite trade to minimize the possible disruption from the US economic sanctions.

If the three countries sign a unified agreement, it will be conducive to local currency settlement and the development of the highly complementary trilateral trade, Guo Tianyong, head of the Chinese Banking Industry Research Center at the Central University of Finance and Economics in Beijing, told the Global Times.

Global Times