The European Bank for Reconstruction and Development (EBRD) has warned that Russia’s growing trade in the Chinese yuan as a response to Western sanctions could potentially erode the strength of the US dollar, according to a recent Bloomberg report.
The share of greenbacks in mutual settlements between Moscow and Beijing has substantially shrunk over the past two years, official statistics show.
“You see that this increase in the usage of the Chinese currency is coming at the expense of the US dollar,” EBRD Chief Economist Beata Javorcik told Bloomberg in a report published on Wednesday. Sanctions have “also given impetus to countries to think about diversifying invoicing currencies, and long-term, this could erode the dominance of the dollar,” she added.
The report also highlighted an academic paper, co-authored by Javorcik, revealing a growing trend of more countries utilizing the yuan. These states had established swap lines with the People’s Bank of China and were not involved in the sanctions against Russia.
Trade turnover between Russia and China soared past $155 billion in January-August after hitting record levels in 2022. The two nations are now poised to exceed their $200 billion target for this year, and they remain steadfast in their belief that achieving an annual $250 billion in trade is “absolutely realistic.”
The strengthening of economic ties between the two nations has been fortified by their joint commitment to conducting a significant portion of transactions using their respective national currencies instead of the US dollar. Moscow and Beijing have intensified their efforts to diminish their dependence on the dollar and euro in global trade, especially in light of Western sanctions imposed on Russia and the ongoing trade dispute between the US and China.
The de-dollarization of Russia-China trade is practically complete, according to Georgy Zinoviev, the director of the Russian Foreign Ministry’s First Asian Department. He told RIA Novosti news agency this month that the share of national currencies in Russian-Chinese payments is growing rapidly and currently exceeding 80%.
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