RMB becomes Russia's only foreign currency!

As trade and economic ties between China and Russia are expected to deepen, the yuan will gain appeal among Russian firms, at a time when the Russian economy is restricted from Western financial networks.

Ozon Holding, one of Russia's largest online retailers, is doubling down on the Chinese currency to fend off increasing external uncertainty.

RMB

in Russia

↑ Picture: XINHUANEWS

With more e-commerce businesses from China flourishing in Russia, the yuan will be more broadly used.

Simon Huang, managing director of Ozon China, told the Global Times in a recent interview that "this year, we are actively promoting settlement in the yuan for Chinese cross-border sellers on our platform. From commodity pricing to payment, the process is centered on the yuan to reduce the risk of exchange-rate fluctuations."

Ozon said in November last year that it would open an office in Shenzhen, South China's Guangdong Province, to boost cross-border sales to Russian shoppers on its platform.

By year-end, the number of Chinese sellers on the platform had grown by 2.5 times year-on-year.

The platform aims to have about 100,000 cumulative active Chinese sellers by the end of 2024. E-commerce has become an important part of China-Russia bilateral economic and trade cooperation, which hit a record high of 1.28 trillion yuan ($190 billion) last year, as Chinese customs data showed.

POPULAR

The popularity of the yuan in Russia is mainly due to the adjustment of Russia's own policies and continuous development of China-Russia economic and trade cooperation.More importantly, the sustained and stable growth of the Chinese economy has laid a solid foundation for the internationalization of the yuan.

The stable exchange rate of the yuan contributes to its appeal in terms of risk aversion, amid tightening of the US Federal Reserve's monetary policy and the conflict between Russia and Ukraine.

According to data released by the Moscow exchange in early March, the volume of renminbi trading on the exchange rose by almost a third month-on-month to RBs1.48tn in February, while dollar trading rose only 8% month-on-month to RBs1.42tn. For the first time, renminbi trading on the exchange surpassed that of the US dollar. Moreover, the renminbi accounts for nearly 40% of Russia's total foreign exchange transactions, compared with just over 38% for the US dollar and 21.2% for the euro. In February last year, the dollar accounted for 87.6% of total foreign exchange transactions in Russia, the euro 11.9% and the yuan 0.32%

 For the first time

the yuan surpassed the dollar in trading volume on the exchange.

Russia's Finance Ministry said at the end of last year that the maximum possible share of the yuan in its National Wealth Fund had doubled to 60% as it restructured the fund to reduce dependency on other currencies.

What are both China and Russia importing?

Russia is a big energy country, exporting a large amount of oil, gas, coal and other resources to China every year. According to preliminary data from the Russian Customs Service, Russia exported 86.25 million tons of oil and 15.5 billion cubic meters of gas to China in 2022.

In addition to energy, there is food. Russia launched the China-Russia Grain Railway hub, the world's first grain hub and Russia's largest grain rail freight station, with reserves of up to a staggering 8 million tons. The cargo terminal is also equipped with a barn that can temporarily store 80,000 tons of grain.

Most of Russia's imports from China include clothes, smartphones and home appliances. In 2020, 70 percent of chips, computers and smartphones in Russia came from China, with Lenovo and Xiaomi among Russia's favorite electronics brands. Especially after Apple's withdrawal from the Russian market, Chinese mobile phone brands quickly flooded into the Russian market, accounting for about 95% of the total by the end of 2022.

Russia's light industry, automobile industry and other relatively backward. Last year, Chinese cars increased their share of the Russian market from 9 percent to 37 percent, and the number continues to rise. Eight of the top 10 cars sold in Russia in February were made in China. Facts have proved that Chinese auto companies can fully fill the vacancy left by the withdrawal of European, American, Japanese and South Korean auto companies.

It can be seen that the current international situation has provided favorable factors for bilateral trade between China and Russia, especially for domestic traders, the use of RMB settlement reduces the exchange rate risk, and the payment and settlement of Russian buyers becomes more convenient.

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