Moscow and Beijing join forces to bypass US dollar in world money market

Move seen as small step towards monetary alliance to bypass US dollar in the global monetary system

PUBLISHED : Friday, 17 March, 2017, 8:02am
UPDATED : Saturday, 18 March, 2017, 12:00pm

Russia’s central bank opened its first overseas office in Beijing on Thursday, marking a small step forward in forging a Beijing-Moscow alliance to bypass the US dollar in the global monetary system.

It was part of agreements made between the two neighbours to seek stronger economic ties since the West brought in sanctions against Russia over the Ukraine crisis and the oil-price slump hit the Russian economy.

Will warmer ties between US and Russia leave China out in the cold?

The opening of a Beijing representative office by the Central Bank of Russia was a “very timely” move to aid specific cooperation, including bond issuance, anti-money laundering and anti-terrorism measures between China and Russia, said Dmitry Skobelkin, deputy governor of the Central Bank of Russia.

Russia is preparing to issue its first federal loan bonds denominated in Chinese yuan.

Officials from China’s central bank and financial regulatory commissions attended the ceremony at the Russian embassy in Beijing, which was set up in October 1959 in the heyday of Sino-Soviet relations.

Financial regulators from the two countries agreed last May to issue home currency-denominated bonds in each other’s markets, a move that was widely viewed as intended to “dethrone” the US dollar.

China looks for tips from Russia on state economy revamp

The People’s Bank of China, appointed the Industrial and Commercial Bank of China as the yuan clearing bank in Moscow in September, laying the foundations for the issue of yuan bonds in the Russian market.

Yi Gang, a deputy governor at the People’s Bank of China, said financial cooperation between the two countries had reached a new high, following an increase in trade deals.

Chinese Premier Li Keqiang said on Wednesday that Sino-Russian trade ties were affected by falling oil prices but that he saw great potential in cooperation.

Vladimir Shapovalov, a senior official at the Russian central bank, said the two central banks were drafting a memorandum of understanding to solve technical issues around China’s gold imports from Russia, and that details would be released soon.