Russia China seek to demolish the dominance of the US dollar. Will they succeed?
The first shipments of Russian coal and crude oil, paid for in yuan, will arrive in China in April and May, respectively. Chinese state media took the opportunity to denigrate the United States, claiming that the international status of the US dollar is "at risk". Despite this, financial expert Albert Song believes this will not affect the status of the US dollar as the leading global reserve currency.
Fenwei Energy Information Service Co. , China's leading provider of information and services to the coal and coke industries, revealed that several Chinese companies bought Russian coal in Chinese currency in March and the first shipment was reported to take place in April. This is also the first shipment of Russian goods paid for in yuan to arrive in China after Russia was sanctioned by Western countries.
In addition to coal, Chinese buyers also used the yuan to buy Russian crude oil. The first ESPO (Eastern Siberia Pacific Ocean) crude oil will be delivered in May, according to a comment posted in early April on Cngold.org, a Chinese online investment media.
According to Chinese operators there will be a decline in the use of the dollar for international payments: "Russia announced that it would accept payments in rubles only for Russian oil and natural gas, which has distanced the United States and European countries from those who they impose sanctions on those who are subject to sanctions ”, reads the comment. “The Chinese Yuan seized the opportunity and began to reveal its potential in global trade payments. Now that the coal and oil paid for in yuan will arrive in China, the international community will be envious of our success "
On April 23, Albert Song, a researcher from Tianjun, a political and economic think tank, told The Epoch Times that China's recent purchases of Russian commodities in yuan will not affect the international status of the US dollar, "because it is only bilateral trade agreements between China and Russia, not multilateral trade involving other countries. "
According to figures released by the Chinese General Administration of Customs in mid-April, the amount of coal and lignite imported into China fell 39.9% yoy in March and 24.2% yoy in the first quarter. However, Russian imports not only held the top spot in China's coking coal imports in March, but the quantity more than doubled year over year.
China's total imports from Russia are also growing significantly. The latest mid-April report from the General Administration of Customs showed that in the first quarter of 2022 its total imports from Russia increased to $ 21.73 billion, a 31% jump year-on-year, ranking second only. 31.4% of Indonesia.
In touting the growing influence of the Chinese currency, the article on Cngold.org also revealed that the Chinese regime is currently negotiating with Saudi Arabia, planning to use the renminbi to pay for some of its crude oil.
Song disagrees with the commentary conclusion that the Chinese yuan is an emerging star on the international market.
“The most important thing is that a country's sovereign currency is recognized by many countries. Although the Communist Party of China claims that the renminbi is on the path to internationalization, the renminbi's share of international payments over the years has been only 3.2% because it is a government-controlled currency and cannot be exchanged freely. So it's a low-credit currency to begin with, ”Song commented.
A China, however, attentive to sanctions
On April 7, the European Union announced the fifth round of sanctions against Russia, including a ban on Russian coal imports.
The toughest sanction so far is to cut Russian banks out of the global financial system. After Visa and Mastercard suspended services in Russia, Russian banks said they planned to issue cards using China's UnionPay system.
As China's largest credit card brand, Unionpay cards are issued in over 70 countries and regions.
However, Russian news agency RBC reported on April 20 that China's UnionPay refused to partner with Russian banks for fear of sanctioning, leaving Russia with fewer options for a credit card provider for its global business. .
“China UnionPay chooses not to cooperate with Russian banks, for fear that it will be involved in the sanctions itself. The CCP needs the New York Clearing House interbank payment system to get dollars. Sanctions against China will prevent it from earning foreign currency through exports, ”Song explained.
He further explained that there are three driving forces for China's economic growth: foreign trade, investment and consumption.
An ideal, but unique, situation for a bilateral Rubles / Yuan exchange
China and Russia are in an almost ideal situation for the construction of a reciprocal payment system based on a direct Rubli / Yuan exchange: in fact, the exchange is at similar levels, and in 2020 it marked a slight Russian trade deficit of just over 5 billion dollars, consisting of 49 billion of Russian exports to China and 54 billion of Chinese exports to Russia, a situation of almost balance that favors the interconnection between the two systems. however, not causally, the reference values of the goods are always expressed in Dollars. If you want a comparison on the external market that is always the currency to measure against.
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The article Russia China seeks to demolish the dominance of the US dollar. Will they succeed? comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/russia-cina-cercano-di-demolire-la-dominanza-del-dollaro-usa-ci-riusciranno/ on Tue, 03 May 2022 16:46:49 +0000.