The European Bank for Reconstruction and Development (EBRD) has raised concerns about the potential impact of Russia’s increasing use of the Chinese yuan on the strength of the US dollar, according to a recent report by Bloomberg. The EBRD Chief Economist, Beata Javorcik, stated that the rise in the usage of the Chinese currency is at the expense of the US dollar. She further added that the imposition of Western sanctions has prompted countries to consider diversifying their invoicing currencies, which could ultimately weaken the dominance of the dollar.
Official statistics reveal that the share of the greenback in settlements between Moscow and Beijing has significantly decreased over the past two years. This trend aligns with an academic paper co-authored by Javorcik, which highlights the increasing utilization of the yuan by countries that have established swap lines with the People’s Bank of China and are not involved in sanctions against Russia.
The strengthening of economic ties between Russia and China is a result of their shared commitment to conducting a significant portion of transactions using their national currencies instead of the US dollar. This move is driven by the desire to reduce dependence on the dollar and euro in global trade, particularly in light of Western sanctions imposed on Russia and the ongoing trade dispute between the US and China.
Trade between Russia and China has seen remarkable growth, with turnover surpassing $155 billion in the first eight months of this year, following record levels in 2022. The two nations are on track to exceed their $200 billion target for 2023 and remain optimistic about achieving an annual trade volume of $250 billion, which they view as a realistic goal.
Georgy Zinoviev, the director of the Russian Foreign Ministry’s First Asian Department, stated that the de-dollarization of Russia-China trade is nearly complete. He reported that the share of national currencies in Russian-Chinese payments is growing rapidly and currently exceeds 80%.
In summary, the EBRD has cautioned that the increasing use of the Chinese yuan in response to Western trade restrictions could erode the dominance of the US dollar. Russia and China have been actively strengthening economic ties by conducting transactions in their national currencies, aiming to reduce dependence on the dollar and euro. Trade between the two nations has experienced substantial growth, with the de-dollarization of their trade almost complete.