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India Does Not Support the Use of RMB for Foreign Trade Settlement

Well-known Chinese news site Sohu (NASDAQ: SOHU) recently reported that, according to three Indian government officials involved in policymaking and two banking sources, India has asked banks and traders to avoid using the Chinese Yuan (RMB) to pay for Russian imports. India is “dissatisfied” with foreign trade settled in Yuan, said a government official directly involved in the matter. Another Indian official said that, until relations between China and India improve, India cannot allow the use of the Yuan for settlement. Analysts believe that India’s motivation comes mainly from political factors. Tens of thousands of Indian troops have been deployed along the disputed Himalayas since 2021, clouding geopolitical ties. Indian officials did not say whether there were economic reasons behind India’s reluctance to accept Yuan settlement. In 2022, UltraTech Cement, India’s largest cement producer, used RMB to purchase a batch of Russian coal. The deal sparked concern among Indian authorities. The Reserve Bank of India (RBI), not keen on using Yuan for foreign trade settlements, confirmed that the government has blocked it. The Indian Rupee is partially exchangeable, meaning it must be converted into U.S. Dollars before it can be converted into any other currency, making the rupee an unattractive as a reserve currency for global central banks and settlement of trade.

Source: Sohu, March 15, 2023