Dumping Dollar? Russia and China agree to bilateral trade in national currencies

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June 8, 2019

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By Countercurrents Team

The all-powerful U.S. Dollar is not that lovely thing now-a-days. Significant moves are on to dump the U.S. Dollar.

Media reports said:

Russia and China took another step away from the U.S. Dollar after the two countries agreed to develop bilateral trade using the Ruble and the Yuan.

It was one of the major deals reached after Vladimir Putin and Xi Jinping, the presidents of the two countries, held talks in Moscow on Wednesday.

“Russia and China intend to develop the practice of settlements in national currencies,” Putin told journalists at the news conference following the talks.

Putin added that the states have signed intergovernmental agreements on expanding the use of the Yuan and the ruble in bilateral financial operations.

A draft government decree on the national currencies trade was released earlier during the day.

The document stipulates that the two countries will cooperate on development of national payment systems, and facilitate cross-border payments in national and other currencies.

In another major deal, the Russian Direct Investment Fund (RDIF), China’s Alibaba, and Russia’s Mail.Ru Group agreed to invest $382 million into an e-commerce joint venture. Alibaba Group is to provide some $100 million while the Russian side will fund the rest.

Strategic stability

China and Russia vowed to strengthen contemporary global strategic stability in a joint statement signed by Xi Jinping and Vladimir Putin.

China and Russia intend to deepen strategic mutual trust and strengthen strategic coordination to firmly safeguard global and regional strategic stability, according to the joint statement.

China and Russia note with alarm the extremely dangerous actions of certain states that, out of their own geopolitical and even commercial benefits, destroy or adapt the existing system of arms control and non-proliferation of weapons of mass destruction to their needs, the statement said.

Three pillars

Both sides urged actively promoting the three pillars – nuclear disarmament, non-proliferation of nuclear weapons and peaceful use of nuclear energy, it said.

The two sides reaffirmed their unwavering commitment to the unconditional implementation of the Joint Comprehensive Plan of Action on the Iran nuclear issue and declared their rejection of unilateral sanctions by the United States against Iran, according to the statement.

China and Russia also pledged to promote multilateralism and expressed commitment to working together to preserve the system of international mechanisms on non-proliferation and arms control.

Changes unseen in a century

Bottom of Form

Acknowledging the world is undergoing profound changes unseen in a century, Xi said China and Russia shoulder an even greater expectation from the peoples of the two countries and the international community.

Noting that the world today is becoming increasingly uncertain and unstable, Xi said enhancing the China-Russia relationship is the call of history, and a firm strategic choice by both sides.

BRI and EEU

The two sides, according to Xi, should actively push forward their cooperation to dock the Belt and Road Initiative (BRI) and the Eurasian Economic Union (EEU) to promote regional economic integration.

He said China and Russia, both permanent members of the UN Security Council, are going to continue working with the international community to safeguard the international order that is based on the international law with the UN at the core, maintain multilateral trading system and make new contributions to the building of a community with a shared future for humankind.

Putin called on the two countries not to be complacent about what they have achieved, but be dedicated to bettering their bilateral relations.

Putin said Russia is ready to provide China with sufficient oil and gas, and export more soybeans and other farm produce to China, and expects a faster alignment between the Eurasian Economic Union and the BRI.

Xi and Putin exchanged views on the Korean Peninsula situation, the Iran nuclear issue and the Venezuela issue, among others.

Safeguard multilateralism

The two heads of state agreed to step up communication and coordination in the UN, the Shanghai Cooperation Organization (SCO), the BRICS, the APEC, and the G20 to jointly safeguard multilateralism and the norms of international relations.

Chinese businesses consider moving production to Russia as trade war with US escalates

Small and medium-sized enterprises in China, under pressure from Washington’s trade war, are studying the possibility of moving production to Russia.

That’s according to the secretary general of the China Overseas Development Association (CODA), He Zhenwei, who talked to RIA Novosti ahead of the St. Petersburg International Economic Forum (SPIEF).

Trade between China and the US mainly relies on small and medium-sized enterprises, while China’s bilateral trade with Russia accounts for large state-owned enterprises, He said.

“However, many Chinese export-oriented small and medium-sized enterprises are now facing difficulties. The US has already raised its duties on Chinese goods from 10 percent to 25 percent, which is tantamount to closing its doors. In case American consumers agree to pay more out of their pockets, these companies will be able to raise prices on products by 25 percent, which is hardly probable,” He said.

In such harsh conditions, Chinese companies are now struggling to maintain their existence. “They should think about moving production to Russia,” he said.

He added, “Chinese goods produced in Russia could be further sold in the United States and even in Europe.”

Trade between Russia and China saw historic growth last year of around 25 percent to US$108 billion, beating all forecasts.

According to Putin, China is and will continue to be Russia’s number one foreign trade partner.

Putin recently said that the two countries are enjoying their best trade and economic ties ever.

Russia buys quarter of World Yuan reserves in shift from Dollar

A January 9, 2019 Bloomberg report said:

Russia’s central bank dumped $101 billion in U.S. holdings from its huge reserves, shifting into Euros and Yuan last spring amid a new round of U.S. sanctions.

The central bank moved the equivalent of $44 billion each into the European and Chinese currencies in the second quarter, according to a report published on late Wednesday by the Bank of Russia, which discloses the data with a six-month lag. Another $21 billion was invested in the Japanese yen.

“Russia is making a strategic shift in its reserves towards holding fewer dollars and more assets in other currencies,” said Benn Steil, director of international economics at the Council on Foreign Relations in New York.

The data reveal a dramatic acceleration in a policy Russia has been pursuing for several years of reducing exposure to assets that could be affected by U.S. restrictions.

Russian holdings of U.S. Treasuries dropped by about $81 billion in May and June of 2018, according to U.S. data.

Russia is not alone

Russia isn’t alone in its bid to reduce reliance on the world’s reserve currency amid increasing attempts by Washington to use economic leverage for geopolitical ends.

In a deepening trade war with America, China sold a large portion of its U.S. Treasury holdings last year and officials in Europe put forward proposals to increase the use of the euro in regional transactions.

“We aren’t ditching the dollar, the dollar is ditching us,” Russian President Vladimir Putin said in November. “The instability of dollar payments is creating a desire for many global economies to find alternative reserve currencies and create settlement systems independent of the dollar. We’re not the only ones doing it, believe me.”

Russia’s reserves are among the 10 largest in the world, totaling $458 billion at the end of June 2018. The data suggest Russia accounted for 90 percent of the inflows into the Chinese bond market in the first half of 2018, analysts at Morgan Stanley wrote in a research note published Thursday.

India and UAE agree to trade in local currencies

Citing the Indian Embassy in Abu Dhabi, an earlier report said:

India and UAE have inked a currency swap agreement to boost trade and investment without involvement of a third currency like the US dollar.

The swap is for an amount of two billion UAE dirham or 35 billion Indian rupees (US$495 million)

“The bilateral currency swap agreement between India and UAE is expected to reduce the dependency on hard currencies like the US dollar,” the embassy said.

“It is also expected to give a push for the local currencies of the two nations and may reduce the impact of volatility in exchange rate arising from the dependency on a third currency. It is also expected to reduce the transmission costs arising from exchange rate risk,” the embassy added.

With more than $50 billion in bilateral trade, the two countries are each other’s largest trade partners.

India’s foreign direct investment into the UAE was $6.6 billion in 2017 while the UAE’s investment in India stood at $5.8 billion

UAE is the sixth-largest oil exporter for India, with non-oil trade between them accounting for $34 billion.

Dollar-free monetary union: Russia-led free trade zone may adopt single currency

Another media report said:

The members of the Eurasian Economic Union (EEU) may abandon border procedures and adopt a common currency in the future by analogy with the European Union (EU), according to the President of Kyrgyzstan Sooronbay Jeenbekov.

Jeenbekov noted, “Like in the European Union we have no borders, no border guards. All our nationals are freely traveling across the Union and are entitled to same services, no matter which – medical, educational.”

According to him, the EAEU member countries should work towards boosting competition with third countries.

Jeenbekov said, “I believe that in 2040, the economy of our countries will be the same as in the European Union, the US, Japan and in other leading nations.”

The EEU, which is based on the Customs Union of Russia, Kazakhstan, and Belarus, was established in 2015. Armenia and Kyrgyzstan later joined it. In 2016, Vietnam officially became the first non-regional country to join the bloc. The union is designed to ensure the free movement of goods, services, capital and workers between member countries.

More than 40 countries and international organizations including China, Indonesia, and Israel, as well as some South American countries, have expressed interest in a free-trade deal with the EEU. The trade bloc is also negotiating with South Korea, Egypt, and India.

In 2017, the Central Bank of Russia (CBR) proposed to create a joint digital currency for BRICS countries and the Eurasian Economic Union (EEU). It could replace the US dollar and other currencies used in settlements among the member states, CBR said.

6 June 2019

Source: countercurrents.org

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