Abandoning the US dollar in Russian-Chinese trade and switching to national currencies is a necessary measure in the current circumstances, according to Nelson Wong, the head of the Shanghai Centre for RimPac Strategic and International Studies. Wong made these remarks during the Valdai Discussion Club meeting in Sochi. He explained that de-dollarization was not a choice made by the two countries, but rather a necessity forced upon them by Western sanctions against Russia related to the Ukraine conflict.
One of the key sanctions imposed on Russia was the disconnection from the SWIFT interbank messaging system. This greatly limited Russia’s ability to conduct international transactions. As a result, trade between China and Russia could no longer be settled through this system. Wong emphasized that this situation has forced the two countries to seek alternative measures, such as settlements in their own local currencies – either the renminbi or rubles.
Wong highlighted that Russia and China are natural partners whose economies are complimentary to each other. China relies on Russia for the supply of gas and minerals, while Russia benefits from China’s demand for its products. However, their partnership goes beyond economic factors. Both countries share common goals, including moving towards a multipolar world where the US does not have unilateral control over global affairs through its currency.
Wong stated, “Our political leadership has a good understanding of each other, and they share common views towards the future of the world, which everybody hopes is going to be fairer, more respecting of every country’s interest instead of having one country calling the shots or telling everybody how to behave.” He emphasized that the call for multipolarity is about respecting the interests of every country, regardless of their size or power.
While progress has been made in the de-dollarization process, Wong acknowledged that there is still much work to be done to create a new decentralized global trade system. He emphasized that the implementation of new settlement methods in everyday life and business activities will be a learning experience for both countries, their financial systems, and businesses. The ultimate goal is to build a new trade system where the US dollar is not the sole dominant currency.
Georgy Zinoviev, the director of the Russian Foreign Ministry’s First Asian Department, announced last month that the de-dollarization of Russia-China trade is largely complete. He stated that the share of rubles and yuan in mutual settlements between the two countries exceeds 80%, compared to around 25% at the beginning of 2022.
According to calculations from the Russian Economic Development Ministry, the share of the ruble and currencies of “friendly” countries, including the Chinese yuan, in Russia’s foreign trade has significantly increased. By mid-2023, these currencies accounted for 72% of Russia’s exports (up from 15% in early 2022) and 69% of imports (up from 33% in early 2022).
The shift away from the US dollar in Russia-China trade reflects a growing trend towards reducing dependence on the US currency in international transactions. It is part of a larger effort to establish a more multipolar world where multiple currencies play a significant role. While challenges remain, the progress made by Russia and China in de-dollarization sets an example for other countries seeking alternative ways to conduct trade and mitigate the impact of US sanctions.