Putin, Xi Vow to Use Yuan as Russia and China Move to Settlements in National Currencies

As part of the talks that Russian president Vladimir Putin and Chinese president Xi Jinping are currently conducting in Russia, Russia has vowed to move to use the Chinese yuan as a settlement currency with countries in Asia, Africa, and Latam. Putin expressed that using national currencies for international trading “should be encouraged further.”

Russia Expresses Support for Using Chinese Yuan in International Settlements

President Vladimir Putin of Russia has made statements supporting substituting the U.S. dollar as a settlement currency for settling international payments. As part of the visit that China’s President Xi Jinping is conducting to Russia, Putin expressed his positive opinion on the use of the Chinese yuan as a form of payment in bilateral trade, especially with emerging economies.

Quoted by the Tass news agency, Putin stated:

We support the use of Chinese yuan in payments between Russia and countries of Asia, Africa, and Latin America.

Currently, two-thirds of the commercial exchanges made between Russia and China are managed using national currencies, and according to Putin, this should be developed further, with a deeper level of integration between the banking and market institutions in both countries.

Moving Away From the Dollar

Russia is part of a global group of countries that are trying to move away from the U.S. dollar as a part of their bilateral and multilateral payments arrangements. In August, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) released data showing that Russia was the third largest market that used yuan for global payments. Also, at that time, the Chinese yuan ranked fifth among the most used currencies for these settlements.

However, according to analysts, these figures might climb due to the new global configuration that the current Russia-Ukraine conflict is causing in economic markets. Dong Dengxin, director of the Finance and Securities Institute of Wuhan University, stated:

If sanctions on Russia continue, the share will continue to increase in its use.

However, others believe that this reliance on the Chinese yuan might be detrimental to Russia in the long term. Carnegie Endowment for International Peace analyst Alexandra Propopenko wrote:

Russia is swapping its dollar dependence for reliance on the yuan. Should relations with China deteriorate, Russia may face reserve losses and payment disruptions.

Other groups have their own plans to move away from the dollar. BRICS nations — Russia being one of them — are currently working to issue their own reserve currency. In January, Brazil and Argentina also made announcements on the creation of a Latam common currency to be used for settlement.