Ruble & Yuan dominate 90% of Russia-China trade settlements

Amid growing pressure the US dollar is set to loose dominance globally specially against China's Yuan. Recently in the report related to Russia's foreign exchange being published by the Bank of Russia (CBR)that the share of Chinese yuan in the Russia's foreign exchange market was all time high in March,has sent ripples through global financial circles raising concerns about the broader implications of this significant shift.
Russia and China have brought the share of mutual trade settlements in their respective national currencies to a staggering 90%, Yury Ushakov, a senior foreign policy aide to Russian President Vladimir Putin, reportedly said,following a phone call between Putin and his Chinese counterpart Xi Jinping, , signaling the deepening strategic partnership between the two nations.
The turnover of exchange- traded yuan amounted to 53% last month compared to 46.6% in February, according to the CBR. The share of renminbi in over- the-counter trading also posted a record high, reaching 39.6%.
Meanwhile, the share of Western currencies, including the US dollar and the euro, dropped to 46.4% on the exchange in March from 52.8% the previous month, according to recent reports. In the over-the-counter segment, the share of the greenback and euro also continued to decline, decreasing to 54.7% from 59.8% in February.
Russia’s shift away from major Western currencies started with the US and EU sanctions imposed on the country over the Ukraine conflict. The financial restrictions made cross- border trade in euros and dollars more difficult and their presence on the domestic foreign exchange market less important.
The move aligns with Russia's long-term economic strategy, which aims to foster closer ties with Asian markets, particularly China. Bilateral trade between Russia and China has surged in recent years, fueled by energy deals, infrastructure projects, and collaborative efforts in sectors such as technology and defense. Consequently, there has been a natural inclination towards settling transactions in yuan, reflecting the growing economic interdependence between the two nations.
Analysts believe the changes in the yuan and dollar trading volumes reflect Russia’s shift away from transacting in the currencies of so-called ‘unfriendly’ countries against the backdrop of international sanctions.
The restrictions include the blacklisting of a number of Russian banks and their removal from the SWIFT (The Society for Worldwide Interbank Financial Telecommunications) interbank messaging system, as well as bans on transactions with Russian financial entities and the freezing of foreign exchange reserves.
Meanwhile, Russia continues to establish the conditions for settlements in various national currencies, according to CBR Governor Elvira Nabiullina. Over the past year, the volume of settlements in currencies other than the dollar and euro has surged from 39% to 67%, according to her.

Calls to move away from relying on the U.S. dollar for trade are growing. However, experts caution that while the yuan's ascent on Russia's foreign exchange market is notable, the dollar remains the dominant global reserve currency, enjoying unparalleled liquidity and stability. Any significant challenge to its status would require sustained efforts and structural reforms by multiple stakeholders.

(Ira Singh, Asstt Editor, Gandhinagar)