BEIJING: In the wake of sanctions on Russia, China has pushed to conduct more trade using the yuan in an effort to reduce its reliance on the dollar, a UK newspaper reported. In the last year, a drive to insulate China’s economy from dollar-based sanctions has emerged as possibly the most important incentive for decoupling from the dollar, as China looks to prepare for the possibility of conflict with Taiwan.
After Russia’s invasion of Ukraine, one of the most powerful tools for inflicting economic harm on Moscow was to essentially cut the country off from transactions based on US dollars, limiting its ability to trade with other countries, The Guardian reported.
But as well as punishing the Kremlin, there has been an unintended winner from West’s sanctions regime: the Chinese yuan. Last year the share of Russian imports paid for in yuan rose from 4 to 23 per cent. In February the yuan overtook the dollar as the most traded currency on the Moscow exchange for the first time in its history.
China’s push to boost the internationalisation of its currency predates the war in Ukraine and although the yuan is still far behind the dollar in terms of global activity, between March 2021 and March 2023 its share of the trade finance market — the multi-trillion dollar ecosystem that underpins 80 per cent of world trade — more than doubled, according to data from Swift, an interbank messaging platform, The Guardian reported.
China is also encouraging other countries to adopt the yuan for international transactions. Argentina and Brazil recently reached agreements to pay for Chinese imports in yuan rather than US dollars.
In April Bangladesh announced that it had approved a payment in yuan worth $318 million to settle part of a Russian loan that had been used to finance a nuclear power plant development. It is a rare example of the yuan being used for an international transaction that does not involve China, The Guardian reported. In March, a Chinese company used yuan to buy 65,000 ton of liquefied natural gas (LNG) from TotalEnergies, a French multinational, the first time that China’s currency has been used in an international LNG transaction. Beijing does not want to be dependent on the use of dollars for essential imports, so this is a key step in ensuring China’s energy security, The Guardian reported. (IANS)
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