The Chinese yuan has become the most traded foreign currency on the Russian exchange as the Kremlin aims to do away with the U.S. dollar in the Russian economy.

According to SCMP, citing data from the Moscow Exchange Group, on Monday, October 6, about 65,000 yuan-rouble transactions were executed with a total trading volume of 70.3 billion roubles or $1.17 billion. The yuan-rouble orders doubled the number of U.S. dollar-rouble spot trading the same day. 

Many foresaw the circumstance after the West sanctioned Russia for invading Ukraine. Alexey Moiseev, Russian Deputy Finance Minister, said, “Russia no longer needs the U.S. dollar as a reserve currency.” But, he added, “The currency that everyone is looking at first of all now is, of course, the yuan, because there is a large market and a stable exchange rate, at least concerning the dollar.” 

However, Beijing doesn’t seem to support the idea entirely. According to Deputy Finance Minister Timur Maksimov, Chinese authorities are unwilling to adjust regulations to allow their investors to invest in Russia-issued bonds. 

Instead, China is more comfortable with foreigners investing in its so-called “panda bonds,” which are sold only in the internal Chinese market.

Increasing the yuan’s use in financial operations has sparked controversy. While many Russian experts welcome the yuan, others express concerns about having 17% of foreign exchange reserves in yuan. They believe this will limit liquidity, and the Kremlin might fall into China’s trap. 

The economist Stanislav Mitrakhovych pointed out that nonmarket regulations in China will make it difficult to evaluate the yuan’s price, which, on the other hand, could be easily manipulated by the Chinese regime.

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