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China Promotes Local Currency Settlement with Russia, Iran and Middle East

Chinese Foreign Minister Wang Yi, who was visiting the United Arab Emirates, said he wanted to promote greater use of local currency settlements in Sino-Arab trade and investment. Wang said that the two countries should raise the level of financial and investment cooperation, “promote the use of local currency settlement in bilateral trade and investment,” and work together to build the Sino-Arab “Belt and Road” international exchange.

Russian Foreign Minister Sergei Lavrov mentioned the same issue during a meeting with Wang Yi in Guangxi, China. He said that Russia and China should promote settlement in local currency through autonomous innovation in the technology industry and get rid of the international payment system controlled by the West.

In recent years, Russia, hit by U.S. sanctions, has sought to promote “de-dollarization.” The BBC previously reported that the Eurasian Economic Union (EAEU), of which Russia is a member, will promote trading in its own currency in 2020, bypassing the US dollar and the euro. The alliance also includes Armenia, Belarus, Kazakhstan and Kyrgyzstan.

Recently, the share of U.S. dollar settlements in China-Russia trade has also been decreasing. According to the Financial Times, 90 percent of Russia-Chinese trade was settled in U.S. dollars in 2015, but by Q1 of 2020, that share dropped to less than 50 percent.

Also recently, China has emphasized the importance of the “internationalization” of the RMB. Fang Xinghai, Vice Chairman of the China Securities Regulatory Commission (CSRC), said in June 2020 that external financial pressure has made the internationalization of the RMB an urgent issue and it should be accelerated over the next 10 years. Against the backdrop of the U.S.-China trade war, he also mentioned that many Chinese financial institutions and enterprises conduct their business internationally using the U.S. dollar payment system. However, the Russian experience has forced China to take early precautions and respond well.

In addition, China and Iran recently signed an agreement to invest US$400 billion over the next 25 years, the details of which have not been made public. However, on March 28, Chinese scholar Jin Canrong quoted Iranian reports on his Weibo account which said that “oil and other commodity trade transactions between China and Iran will be settled in RMB and China’s new digital currency, avoiding the US dollar.”

Source: Central News Agency, March 28, 2021