Friday 31 October 2008
China-Russia to Scrap USD for Bilateral Trade?
Russian Prime Minister Vladimir Putin has urged that China and Russia use RMB and rubbles in their bilateral trade. But China is understandably hesitant, with worries about the rubble’s volatility and that the US might well think China is ganging up with Russia in an attack on the US dollar.
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China-Russia to Scrap USD for Bilateral Trade?
31 October 2008
Russian Prime Minister Vladimir Putin has urged that China and Russia use RMB and rubbles in their bilateral trade. But China is understandably hesitant, with worries about the rubble’s volatility and that the US might well think China is ganging up with Russia in an attack on the US dollar.
Garegin Tosunyan, president of Association of Russian Banks, said in Beijing that the two countries might agree to settle bilateral trade with their own currencies after several months.
Mr. Tosunyan said there was no major obstacle on this issue, and that the two central banks had already established an agent relationship.
Wan Chengcai, an expert for the Development Research Center of the State Council, said although there was no major obstacle, Russia had not raised any detailed suggestion on this issue, but it might come to pass if the two countries both have faith in the new system.
Li Zhonghai, researcher for the Institute on Russian, East European, and Central Asia Studies of the Chinese Academy of Social Sciences, told China Business News that the key of the new settlement system would be the establishment of an exchange rate, but that even if bilateral trade were to be settled with domestic currencies, the exchange rate would still be decided according the their exchange rates against USD or Euro.
“If the rubble became reserve currency, who would have the faith to buy it? The rubble is now depreciating both domestically and internationally. If oil prices continue dropping next year, Russia’s financial situation will become more severe,” said Li.
According to Mr. Tosunyan, at least ten Russian banks, including some private banks, are now preparing to conduct settlement and exchange business of RMB and rubble.
But Li Zhonghai says, “China has as yet made no response to the suggestion. Otherwise it would appear China is going against the USD jointly with Russia. Compared with rubble, RMB is closer to the USD.”
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