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Page added on August 9, 2014
De-Dollarization Accelerates – China/Russia Complete Currency Swap Agreement
The last 3 months have seen Russia’s “de-dollarization” plans accelerate. First Gazprom clients shift to Euros and Renminbi, then the UK signs currency swap agreements with China, then NATO ally Turkey cuts ties and mulls de-dollarization, Switzerland jumps in the currency swap agreements, and BRICS create their own non-US-based funding vehicle, and then finally this week, Russia’s oligarchs have shifted cash holdings to Hong Kong. But this week, as RT reports, Russian and Chinese central banks have agreed a draft currency swap agreement, which will allow them to increase trade in domestic currencies and cut the dependence on the US dollar in bilateral payments. ““The agreement will stimulate further development of direct trade in yuan and rubles on the domestic foreign exchange markets of Russia and China,” the Russian regulator said.
In early July, the Central Bank’s chairwoman Elvira Nabiullina said Moscow and Beijing were close to reaching an agreement on conducting swap operations in national currencies to boost trade. The deal was later discussed during her trip to China.
President Vladimir Putin, during his visit to Shanghai in May, said cooperation between Russian and Chinese banks was growing, and the two sides were set to continue developing the financial infrastructure.
“Work is underway to increase the amount of mutual payments in national currencies, and we intend to consider new financial instruments,” Putin said after talks with President Xi Jinping.
It appears the deal is done…
The Russian and Chinese central banks have agreed a draft currency swap agreement, which will allow them to increase trade in domestic currencies and cut the dependence on the US dollar in bilateral payments.
“The draft document between the Central Bank of Russia and the People’s Bank of China on national currency swaps has been agreed by the parties,” and is at the stage of formal approval procedures, ITAR-TASS quotes the Russian regulator’s office on Thursday.
The Russian Central Bank is not giving precise details on the size of the currency swaps, nor when it will be launched. It says this will depend on demand.
According to the bank, the agreement will serve as an additional instrument forensuring international financial stability. Also, it will offer the possibility to obtain liquidity in critical situations.
“The agreement will stimulate further development of direct trade in yuan and rubles on the domestic foreign exchange markets of Russia and China,” the Russian regulator said.
Currently, over 75 percent of payments in Russia-China trade settlements are made in US dollars, according to Rossiyskaya Gazeta newspaper.
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And as we have explained repeatedly in the past, the further the west antagonizes Russia, and the more economic sanctions it lobs at it, the more Russia will be forced away from a USD-denominated trading system and into one which faces China and India.
16 Comments on "De-Dollarization Accelerates – China/Russia Complete Currency Swap Agreement"
JuanP on Sat, 9th Aug 2014 3:17 pm
Bilateral agreements of all kinds will become increasingly common as globalization continues its decline. We could end up bartering goods to survive before we know it. I think food for oil could become a common bilateral barter between countries for a few years until we run out of oil exports.
Davy on Sat, 9th Aug 2014 3:58 pm
Juan, exactly, food for oil a future bilateral trade! Is not food oil these days anyway. Call it a refinery action of turning oil into food. Modern industrial man alchemy. The US will out compete China in this respect. If you are hungry do you trade your oil for food or cheap consumables?
eugene on Sat, 9th Aug 2014 4:51 pm
Globalization is not in nor will it decline until expensive oil makes transportation too expensive. Unfortunately, illiterate Americans will be the last to understand. Moving away from the dollar will have dire consequences for the US. Increasingly the US dollar will be sidelined which means very high inflation will come home. The world is sick of our bullying, constant state of war and total lack of compassion for others. The US/Europe imperialism is dying.
But if elaborate rationalizations help your fears, so be it.
Makati1 on Sat, 9th Aug 2014 8:49 pm
eugene, you said it very well. ^_^
And, as the US dries up in many ways, food exporting will NOT be on the agenda. The grain belt is moving north into Canada very quickly. The East did without wheat and corn for thousands of years. I’m sure they will adjust.
Wait until the cost of food goes back to 30% or more of America’s incomes and then talk about exports.
steve on Sun, 10th Aug 2014 12:02 am
Makati you are such a chump! You want to pause the game while letting the rest of the game play on…you fool…don’t you know the game is up and this is not 1957…..Please spare us with your ridiculous comments…the whole world will suffer not just the U.S….Wait till some thug army comes through your village you won’t be so smug then…I hope you and your family have a lot of guns…not that it will do you any good….
Arthur on Sun, 10th Aug 2014 2:17 am
China and Russia are attacking the US where it hurts most: in the wallet. It does not mean that in the future trade with the US is going to be refused, far from it. It is just that Russia and certainly China (4 trillion dollar) have more dollars than they can ever hope to swap for real values and now they say enough is enough. They would have done so, even if the US would no try to be the world’s policeman. From now on they want tangeble values, gold, grain, computers, fuel, not paper money. And the US can’t deliver real values for the hugh amount of real values it imports. So if the US does nothing, ‘the American way of life’ (meaning: the world works, the US consumes the fruits) is over. The most logical US reaction should be: become mercantilistic. Stop free trade, impose import tarifs and give US industry a chance to recover. Forget about being a Gekko or the
Wulf of Wallstreet, but concentrate on engineering again. Make tools and machinery yourself, not ‘financial products’. But the US elite still has a huge military and tries to find ways to continue the old state of affairs…
Fishman on Sun, 10th Aug 2014 6:04 am
Wow, some pretty strong leaps for an article about currency. Whatever boogieman you want to blame, gets the blame, US military, free trade, capitalism, blah, blah, blah. A currency loses dominancy because it has no backing, huge deficit spending, and no chance of recovery of value. Lets look at the cause for the these, leaving the gold standard (China has been buying gold at a phenomenal rate), present president doubles the total debt (devaluing the currency) and then ipso facto, everyone leaves the dollar as dominant currency
Davy on Sun, 10th Aug 2014 7:57 am
Steve well put. I am glad someone else here occasionally will mention the need for balance, fairness, and clarity.
Eugene, you fail to understand finance and that finance is as important to growth or contraction as transport fuel. Either can end globalization. Finance is currently the most fragile systematic risk and the biggest factor in oil production growth. You also fail to understand the interconnectedness of the global trading system and the dollars position in this. You fail to see the US is a quarter of the world GDP that can’t be decouple from by global BAU. So, your prescription for the US economy is one for the global economy. Your lame comment on US compassion is a joke. Show me any compassion out of the rest of the world. I see nothing but hypocrisy from countries criticizing the US but doing the same thing or nothing. At least the US does have a foreign aid programs. Eugene, google China’s aid program. You and others are speculating on CC effects to the US. Further we are now seeing the real time effects in China from CC, pollution, and development. Instead you focus on the US drying up. Are you anti-American?
Art, China has created more credit in the past few years then the rest of the world combined. This may have been internal credit but nonetheless it is credit. All those dollar reserves are insignificant in relation to that internal credit creation. The dollars are real the Chinese credit is basically inflated probably several times through rehypothecation and shadow banking schemes. A significant portion of Chinese growth is fake. It represents mal-investment and unrealized bad debt. Why do you buy into this deception? Art, why do you think all the wealthiest Chinese are moving their money to the US? They are doing this because they can buy real value with their wealth in an economy that still respects private property. They are not comfortable with the Chinese system of a pseudo capitalism where private property ownership is subjects to the whims of the party. Art, I do agree with your comments on the US turning isolationist. This will not happen until the BAU global economy goes into crisis, then we will see this happen. “But”, will there be time before the rapid descent occurs for this turn to make a difference or will we descend to local quickly? Art, you may want to look at the sickest man in the world economy and that is Europe. Europe is by all normal measures insolvent and descending in stagnation/deflation with Socialistic debts mounting and with sovereign debt never to be repaid.
Makati1 on Sun, 10th Aug 2014 8:10 am
steve, you only hope the rest of the world will suffer as much, but the 1st world will feel the pain first and the most. The higher on the ladder, the harder the splat when you fall off.
As for the Ps, their culture is so different from the West that you cannot imagine it unless you are living in it. The US will be the one with the thugs and gangs and mafias when the SHTF. 50% of Americans are living off of the few who pay taxes. When the socialist safety nets disappear (SNAP, welfare, unemployment insurance) you will see what I mean. Here, there are no safety nets to disappear. When you never had anything, you don’t notice when the rest of the world joins you.
Fishman paints a pretty realistic picture also.
radon1 on Sun, 10th Aug 2014 10:18 am
What are the de-dollarisers going to do once the world is completely de-dollarised? Begin de-yuaninanising it? And then de-monetize it until we all slide to the Stone Age?
Having said that, it is regrettable that the current US policies undermine the people’s trust in the reserve currency.
nvtncs on Sun, 10th Aug 2014 12:41 pm
Eugene, Makati1,
Human nature is such that the rich and powerful nation is always hated by the other nations, mostly out of envy or resentment.
It is also a fact that there is no perfect justice in this world, only a striving for perfect justice as a goal and only by certain nations, not by all, especially those not by those nations ruled by dictatorships.
Eugene used the possessive pronoun “our” and i am giving him the benefit of the doubt by accepting that he is actually an American.
For both of you, I pray that China becomes the sole superpower by far, so that you may live in a better world, more just and more compassionate and that I’d be long dead and miss the more just and compassionate world afforded you by China.
Makati1 on Sun, 10th Aug 2014 8:13 pm
nvtncs, few nations have done so much damage and killed so many people directly and indirectly as has the US in the last 250 years. Attila the Hun would be envious. No regard for laws, either their own or international, unless it is to the US’ benefit. Hypocrisy and lies so blatant, that the response is laughter, not acceptance, except by the brainwashed citizens who vote in these psychos and then keep them there, or are too lazy to even vote, just complain.
Makati1 on Sun, 10th Aug 2014 8:17 pm
nvtncs, I forgot to mention: I am a 14th generation North American and a US citizen, but I am not proud to claim that. My country has slid into the sewer in it’s desire for wealth and power. I would not even go back to visit if my 88 year old mother was gone. And, yes, I have kids and grand kids and great grand kids. I feel sorry for them, but I am powerless to change anything.
nvtncs on Mon, 11th Aug 2014 12:05 am
Makati1,
May i suggest you go to the nearest US consulate and renounce your citizenship at once unless you have already done it.
I hope you are very happy where you live.
i am sure that in your eyes, Stalin, Hitler and Mao combined did not kill as many innocent people as the US.
Be happy, don’t think about the US, if you hate the US and can’t do anything about it, your hate will eat you alive.
Makati1 on Mon, 11th Aug 2014 2:06 am
nvtncs, I’m still an American, exercising the freedom of speech that the US was founded on. Pointing out reality is not being anti-American. It is just the opposite. Americans are obligated to take down their country when needed. It is in the Constitution. That we are too lazy/brainwashed to do so does not remove the need.
Makati1 on Mon, 11th Aug 2014 2:12 am
nvtncs, BTW: I do not hate the US. I do dislike what the few are doing to the many because the many have lost their backbone somewhere after WW2. I dislike what the DC Mafia is doing to the rest of the world. And it is interesting that you mention the few real terrorists of recent history, but did not include our own Clinton, Bush Jr, or Obama. They are right up there with the others. I did not vote for any of the three.
At my age, I will just sit back and watch the US self destruct, hoping my family can survive. I am preparing to make my future years as easy as possible. Are you? I never expected to see the extinction of my species, but it looks like I may get the opportunity.