A recent Bloomberg report revealed the European Bank for Reconstruction and Development (EBRD) is warning that the growing use of the Chinese yuan by Russia in response to Western sanctions could eventually wear on the strength of the US dollar.
Over the past two years, official statistics show that the share of dollars used in mutual settlements between Moscow and Beijing has fallen substantially.
ERBD Chief Economist Beata Javorcik said Wednesday in an interview with Bloomberg, “You see that this increase in the usage of the Chinese currency is coming at the expense of the US dollar,” adding that sanctions have “also given impetus to countries to think about diversifying invoicing currencies, and long-term, this could erode the dominance of the dollar.”
The report also examined an academic paper which Javorcik authored, which examined the growing trend of more countries utilizing the yuan. The states examined in the paper had established swap lines with the People’s Bank of China, and were not affected by the sanctions levied against Russia.
After hitting record levels in 2022, In January-August, trade turnover between Russia and China soared past $1 billion. Both nations are now set to blow past their $200 billion target for 2023, and both maintain that it is “absolutely realistic,” that they could achieve $250 billion in annual trade.
The trade relationship between Russia and China has been strengthened by their dual commitment to conduct significant amounts of their trade transactions utilizing their respective national currencies, instead of the US dollar. The push by both nations to diminish their use of the dollar and euro in global trade has been driven especially by the Western sanctions imposed on Russia, as well as the ongoing trade disputes between Washington and Beijing.
According to Georgy Zinoviev, the director of the Russian Foreign Ministry’s First Asian Department, Russia and China have practically completed the process of de-dollarization. In an interview with RIA Novosti, news agency this month, he said that the share of national currencies being used in Russia-China payments is currently exceeding 80%, and continuing to grow rapidly.
