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Financial cooperation between China and Russia has reached a new level

G e N Iuvinale

As the Sino-Russian relationship of comprehensive partnership and strategic cooperation strengthens and deepens and enters a new era, a new situation in financial cooperation between the two countries is reaching a new level.

Pictured are Russian President Putin and CCP Secretary Xi Jinping

First, the proportion of domestic currency settlements in bilateral trade is increasing significantly.

Second, the integration of settlement and payment systems between China and Russia is accelerating, especially banks, securities market participants, insurance companies, and trust funds are exhaustively seeking ways of financial cooperation with the characteristics of China and Russia to meet the needs of the market for trade settlement, asset management, and insurance between the two countries.

Third, the role of RMB becomes more prominent, it becomes an important settlement and savings currency, and its share in Russia's foreign exchange reserves continues to increase.

The role of the yuan, therefore, is becoming increasingly important in the Russian economic and financial system and the Chinese currency enjoys more and more trust among investors and residents.

In the context of strengthening and deepening China-Russia relations of comprehensive partnership and strategic interaction, a new situation is emerging in financial cooperation between the two countries, relating to the following aspects:

  • First, the share of national currency payments in Sino-Russian bilateral trade is growing significantly. First Deputy Prime Minister of the Russian Federation Andrei Belousov said that almost 95% of bilateral trade between Russia and China takes place in rubles and yuan. Russian Prime Minister Mikhail Mishustin noted that in 2020 the share of national currency settlements in bilateral trade was only 20%, and that in 2023 the two countries actually got rid of the third country's currency in mutual settlements.

  • Second, the integration of settlement and payment systems between the PRC and the Russian Federation is accelerating.

  • Finally, the role of the yuan is becoming increasingly important. On the one hand, the yuan is becoming an important payment currency, and its share in Russia's foreign exchange reserves is gradually increasing. According to the report “Financial Strength Assessment”, published by the Central Bank of Russia, in September 2023 the share of the yuan in the foreign exchange reserves of the Russian Federation increased to 35%. On the other hand, the yuan has become an important savings currency and its share in Russian wealth funds is increasing, currently reaching 60%.

Russians' trust in the Chinese currency is increasing every day. Some financial experts note that yuan loans are becoming increasingly popular in Russia. Russia's largest banks noticed the huge demand for yuan and began lending in Chinese currency. At the same time, the volume of yuan deposits in Russian banks has increased 2-3 times over the past year.

In addition, the yuan is becoming an important investment currency. According to the "Report on the Development of Chinese Companies in Russia (2023)", the Russian securities market issues bonds in yuan, which are becoming a popular asset among investors. Currently, Moscow is already the largest market for offshore yuan trading after Hong Kong (China) and London (UK).

According to representatives of various sectors of Russian society, the yuan has a large area for development, and the potential for bilateral cooperation in the financial sector is still great. In December 2023, the Ninth China-Russia Financial Dialogue took place in Beijing. The parties held an in-depth discussion on topics such as the macroeconomic situation and policy measures, cooperation within the G20 and BRICS, reform of multilateral development banks, interaction in the field of financial and audit supervision, and the participants reached numerous agreements. Russian Finance Minister Anton Siluanov noted that Russia is ready to strengthen financial cooperation with China, in particular in the field of fiscal policy, audit supervision, mutual access of investors to each other's financial markets, multilateral coordination of actions and cooperation between the Russian Federation and the PRC.

Beyond the government level, Russian commercial banks are also showing greater willingness to cooperate with China. Chairman of the Board of Russia's largest public joint stock company, Sberbank of Russia, German Gref, in an interview with the Jingji Daily newspaper, noted that the PRC is one of the main partners in strategic cooperation, Sberbank pays great attention to financial interaction with the Chinese side.

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