China’s authorities are keen to transform the national currency into a global medium of exchange, a status which is currently attached to the US dollar. China has recently taken gradual steps to raise the yuan’s importance in international trade. In September, the country persuaded major oil exporters like Iran and Russia to price the oil futures contracts in the yuan, instead of the US dollar.
Recently, China launched a “payment versus payment” (PVP) system to clear transactions in the yuan and Russian ruble. The new mechanism aims to rival the US SWIFT inter-bank payment system, enabling simultaneous settlement of transactions in two different currencies. With justice, China’s PVP system indeed slashes expenses and simplifies transactions. “When we work with China through the US dollar, there is also the third party in a transaction, the US as a rule. We have to involve US banks, losing money on commissions. The direct payment system relieves both sides of redundant expenses,” said Andrey Ostrovsky, deputy director of the Institute of the Far East at the Russian Academy of Sciences.
Moscow pins great hopes for China’s increasing investment to Russia’s economy. At present, the Kremlin is not pleased with a small volume of foreign investment from the second world’s largest economy. Experts say that China’s business is in no hurry to found firms in Russia. Recently, the two countries greenlighted large-scale projects - gas pipelines called the Power of Siberia and the Altai. These projects have not kicked off so far, though they were approved entirely on conditions of the Chinese partner.
Meanwhile, China is taking advantage of Western sanctions against Russia, boosting its trade with the neighboring country. So, China’s turnover with Russia totaled $46.62 billion for the first seven months of 2017. From now on, all invoices and payments will be presented in the yuan and ruble.