While Russia has been pushed out of the global financial system due to its invasion of Ukraine in 2022, the Chinese yuan is the most traded foreign currency in Russia. But its availability in the heavily sanctioned country could soon dry up, threatening a critical lifeline for Russian businesses. These became very dependent on the yuan when trade with China intensified following the war in Ukraine.
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With our correspondent in Beijing, Clea Broadhurst
As China seeks to expand its global influence, its ties with Russia are double-edged. Russia’s dependence on the Chinese yuan has created major risks. Russian banks lack it, in particular because of the caution of Chinese banks in working with Russian entities due to international sanctions.
Russian economic instability
For the Chinathis presents important issues. Beijing must avoid violating global sanctions, or else face sanctions that could threaten its access to international markets, such as in Europe and North America.
By closely supporting Moscow, Beijing risks isolating itself from its other global partners. Additionally, Russia’s heavy dependence on the yuan exposes China to risks related to Russian economic instability. If the situation in Russia continues to deteriorate, Chinese companies operating in Russia could suffer significant financial losses.
Finally, even if the use of the yuan increases in Russiathis does not make it a major international currency. The yuan remains little present in global reserves and continues to be limited by capital controls in China. The increased use of this currency in Russia does not, however, call into question the dominance of the American dollar.
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