Just a week ago we detailed how China was preparing to bailout Russia’s liquidity crisis via the 150 billion yuan swap line the two nations agreed in October. Today, as Bloomberg reports, we got confirmation as two Chinese ministers offered support for Russia. China will provide help if needed and is confident Russia can overcome its economic difficulties, Foreign Minister Wang Yi was cited as saying; and Commerce Minister Gao Hucheng said expanding a currency swap between the two nations and making increased use of yuan for bilateral trade would have the greatest impact in aiding Russia. The Global Times (mouthpiece for the Comunist Party) wrote in an editorial this weekend, “Russia is an irreplaceable strategic partner on the international stage.” Isolated?
A week ago we noted the movements and tone from China suggested a ‘bailout’ was coming for Russia, and it appears the market is starting to realize that Russia is not so isolated…
It seems CNBC and the mainstream media are oddly quiet about the 31% surge in the value of the Ruble in the last 6 days…
Which is not entirely surprising as, for those who have forgotten who the BRICS are, aside from a droll acronym by a former Goldman banker, here is a reminder of the countries that make up 3 billion in population.
China will provide help if needed and is confident Russia can overcome its economic difficulties, Foreign Minister Wang Yi was cited as saying in Bangkok in a Dec. 20 report by Hong Kong-based Phoenix TV. Commerce Minister Gao Hucheng said expanding a currency swap between the two nations and making increased use of yuan for bilateral trade would have the greatest impact in aiding Russia, according to the broadcaster.
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āMany Chinese people still view Russia as the big brother, and the two countries are strategically important to each other,ā said Jin Canrong, Associate Dean of the School of International Studies at Renmin University in Beijing, referring to the Soviet Unionās backing of Communist China in its first years. āFor the sake of national interests, China should deepen cooperation with Russia when such cooperation is in need.ā
De-dollarization continues…
China and Russia signed a three-year currency-swap line of 150 billion yuan ($24 billion) in October, an agreement that can be expanded with the consent of both parties. The Peopleās Bank of China published a chart detailing how such an agreement works in a microblog dated Dec. 19 and the official Peopleās Daily newspaper said today that the explanation was provided to address concerns the nation could suffer losses if Russia used the facility to obtain funds.
āAs all we pay out and receive in return are renminbi, we donāt have to bear exchange-rate risks,ā the PBOC said in the microblog, using an alternative name for the yuan. The swap amount can be adjusted to allow for changing circumstances and prevailing exchange rates, rather than pre-determined, are used, it said.
China is promoting the yuan as an alternative to the dollar for global trade and finance and the PBOC has signed currency-swap agreements with 28 other central banks to encourage this. The nationās foreign-exchange reserves of $3.89 trillion are the worldās largest and compare with Russiaās $374 billion.
And Russia is not so isolated after all…
āRussia is an irreplaceable strategic partner on the international stage,ā according to an editorial today in the Global Times, a Beijing-based daily affiliated with the Communist Party. āChina must take a proactive attitude in helping Russia walk out of the current crisis.ā
