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MOSCOW, December 22. /TASS/. China’s readiness to back up Russia’s financial system with its national currency is a sure sign of mutual trust and mounting cooperation between the two countries, polled analysts have told TASS.
On Monday, China’s Foreign Minister Wang Yi said China was prepared to support Russia with the yuan and that Russia had the "opportunities and wisdom" for finding out a way of the economic turmoil. The issue in focus is a 150-billion-yuan swap deal between the Bank of Russia and the People’s Bank of China, which allows the central banks to directly buy yuan and ruble in the two currencies, rather than via the US dollar.
The basic agreement on currency swaps the Bank of Russia and the Peoples Republic of China concluded last October is meant to reduce the role of the US dollar, if China and Russia need to help each other overcome a liquidity squeeze.
“The yuan-ruble swap deal was not just a financial matter," Wang Feng, chairman of the Shanghai-based private equity group Yinshu Capital told the South China Morning Post. "It has political implications as it is a sign of mutual trust."
“It is beyond doubt that against the backdrop of major economic contracts, the fact that Russia and China had concluded earlier this year Beijing’s readiness to open a yuan-denominated swap line is a step in the positive direction towards the development of bilateral cooperation, in particular, for developing financial ties that have so far played a rather modest role,” the chairman of Vneshtorgbank’s observer council, in the past the Central Bank governor, Sergey Dubinin, told TASS.
At present, the share of the yuan and the ruble in Russian-Chinese bilateral trade varies from 5% to 7%, according to different estimates. Earlier, Vneshtorgbank President Andrey Kostin said that expanding the use of currencies alternative to the dollar was one of the bank’s key tasks. “In bilateral trade with China, the task of expanding the settlements in rubles and yuans is high on the agenda and we are addressing it,” Kostin said at a meeting with President Vladimir Putin last June.
“The statements in Beijing by the Chinese Foreign Minister and representatives of business quarters about preparations for export settlements with Russia in the yuan is a sound and friendly step by our neighbors, indicating they are well aware of the objective picture of the world that some major political players have been trying to redraw,” the president of the Association of Russian Banks, Garegin Tosunian, has told TASS.
“This decision by China, a world economic leader, is a clear message to the world market that Russia is a respectable partner worthy of full trust. It is a new level of relations the two countries are worthy of, because until just recently the degree of cooperation between Moscow and Beijing had fallen way behind the scale of their economies,” Tosunian said.
One should not think that by opening the swap line China has done Russia a favor. The Chinese nation is great firstly because it always acts in its national interests. In this particular case, Beijing has shown its understanding of market prospects. It relies entirely on sober calculations,” Tosunian believes.
“The settlements in roubles and yuans bypassing the dollar will greatly benefit Russia’s financial institutions, which have been denied a chance to borrow from Western banks. China’s banks are beneficiaries, too. The swap line is not charity but a solution that benefits both sides,” he concluded.
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