Russia, China, and Money

29 Tuesday Mar 2022

Posted by RichardB in China, Economics, Economy, news, Politics, Research

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China, economics, reserve currency, Russia, world

The Russia-led Eurasia Economic Union and China just agreed to design the mechanism for an independent financial and monetary system that would bypass dollar transactions.

“The Eurasian Economic Union (EAEU) and China agreed to design the mechanism for an independent international monetary and financial system.”
Say hello to Russian gold and Chinese petroyuan. https://thecradle.co/Article/columns/7975

The Eurasian Economic Union: Deals, Rules and the Exercise of Power
Regardless of its multiple shortcomings, the Eurasian Economic Union (EAEU) should not be dismissed out of hand. For Russia, it is the primary vehicle for realizing a global geopolitical agenda.
Chatham House Research Paper. https://www.chathamhouse.org/2017/05/eurasian-economic-union

Russia and China, Together at Last: At the core of recent conflicts is an entente between China and Russia that the world hasn’t seen since the start of the Cold War.

“At their February 4 meeting, Putin and Xi drew on 37 prior encounters to proclaim nothing less than an ad-hoc alliance meant to shake the world. As the foundation for their new “global governance system,” they promised to “enhance transport infrastructure connectivity to keep logistics on the Eurasian continent smooth and…make steady progress on major oil and gas cooperation projects.” These words gained weight with the announcement that Russia would spend another $118 billion on new oil and gas pipelines to China. (Four-hundred billion dollars had already been invested in 2014 when Russia faced European sanctions over its seizure of Crimea from Ukraine.) The result: an integrated Sino-Russian oil-and-gas infrastructure is being built from the North Sea to the South China Sea.”
Russia and China Together at Last. https://www.thenation.com/article/world/russia-and-china-together-at-last/

Reserve Currency part 2

22 Tuesday Mar 2022

Posted by RichardB in China, Economics, Economy, news, Politics, Uncategorized

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China, China and Russia form a new economic block, Economy, reserve currency

Before the yuan can become a global currency, it must first be successful as a reserve currency. That would give China the following benefits:

The yuan would be used to price more international contracts. China exports a lot of commodities that are traditionally priced in U.S. dollars. If they were priced in yuan, China would not have to worry so much about the dollar’s value.
All central banks would have to hold yuan as part of their foreign exchange reserves. The yuan would be in higher demand. That would lower interest rates for bonds denominated in yuan.
Chinese exporters would have lower borrowing costs.
China would have more economic clout in relation to the United States.
It would support President Jinping’s economic reforms.

China is working hard to make the yuan the next global currency. Although presently a reserve currency, the yuan can’t upstage the U.S. dollar unless the following scenarios happen:

Central banks around the world choose to keep a total of at least $700 billion worth of yuan in foreign exchange reserves.
The People’s Bank of China (PBOC) allows free trade of the yuan and relaxes its peg to the U.S. dollar.
The PBOC becomes straightforward about its future intentions with the yuan.
China’s financial markets turn transparent.
Chinese monetary policies are perceived as stable.
The yuan acquires the U.S. dollar’s reputation of stability, which is backed by the enormity and liquidity of U.S. Treasurys.