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Settlements in local currencies between Russia and China now account for 7 percent of the bilateral trade, but the potential for growth is tremendous, experts tell RT. Yuan-ruble trade in Russia has grown 700 percent in a year.

Growing cooperation between Russia and China has become one of the hottest topics in the global economy. It is signaling the emergence of a strong alliance of one the world’s richest and strongest economies, which is expected to reshape the existing western-dominated economic model.

While energy deals between the resource – rich Russia and resource – hungry China look natural, bringing the countries’ finances closer looks like a real challenge to the US dollar system, experts agree, although the transition won’t be quick.

“The transition from the usual scheme of payments in major currencies is not a quick process, but with a certain political will and sufficient mechanisms of hedging currency risks in exports and imports it is quite feasible,” Aleksandr Prosviryakov, Treasuries & Commodities Manager at PWC, told RT. He added that the first step towards this was the signing of a three-year agreement on currency swap worth 150 billion yuan in October 2014.

Currency swaps allow companies in both countries to use national currencies in mutual settlements. That means the Russian importers can purchase Chinese products with yuan, and the Chinese can make payments in rubles.

“We see a pretty rapid intensification of trade in the yuan-ruble currency pair in Russia,” he said adding that the volume on the Moscow Exchange increased by 8 times in comparison with the previous year, and 6 times in the OTC market. 
Prosviryakov said the agreement to supply Russian oil to China through the Eastern Siberia - Pacific Ocean pipeline was the first major project implemented through settlement in local currencies.

An increased use of national currencies by major exporting and importing countries will lead to a reduction in the share of traditional currencies in international payments, he added.

The US dollar still remains preeminent in global trade; more than 80 percent is settled in dollars and 60 percent in international reserves. However, in 2014, the yuan leaped to nine percent of international settlements, which gives a chance that its role in the world financial system will become more important.

“There is a reason to believe that this trend will continue in the coming years and the role of the yuan will increase rapidly not only in international trade, but as the currency of international reserves of the central banks,” he said.

Source: www.rt.com

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