Chinese banks cut ties with Moscow exchange amidst new sanctions
Chinese banks are severing ties with the Moscow Exchange due to sanctions. This means that Russians will lack access to the yuan, which is currently used for 99% of cross-border transactions, as reports say.
1:56 PM EDT, July 23, 2024
Bank of China has disconnected the Moscow Exchange from the yuan, reports say.
The volume of yuan trading on the Moscow Exchange has plummeted: in July, it averaged one-third less than in June and half of what it was in January," adds "Rzeczpospolita".
The Chinese currency has replaced the dollar
The Chinese yuan became the primary settlement currency in Russia when new sanctions imposed by the West on the Moscow Exchange came into effect in mid-June following Vladimir Putin's military invasion of Ukraine. As a result, Russians lost easy access to dollars and euros.
The Kremlin faces a significant challenge as "the Russian financial system is chronically short of Chinese currency", according to Mikhail Vasiliev, chief analyst at Sovcombank, speaking to the Frank RG portal. Russian companies primarily acquire the yuan through trade, not directly from Chinese banks.
In its June statement, the Bank of Russia emphasized that over the past two years, the role of the US dollar and the euro in the Russian market has consistently diminished. This shift is due to redirecting trade flows to the East and changing the settlement currency to rubles, yuan, and other currencies from countries friendly to Russia. According to data from the Russian central bank, in May, the yuan accounted for 54% of the trading volume on the Moscow Exchange, making it the primary currency in exchange trading.
