China and Russia to use own currencies for bilateral trade

Nov 29, 2010 12:00 AM

As a reflection of closer ties, China and Russia signed an economic agreement to stop using the US Dollar for bilateral trade between the two countries.
Chinese premier Wen Jiabao and his Russian counterpart Vladimir Putin met together on November 22, 2010 in St Petersburg, Russia and announced an agreement to use their own currencies for bilateral trade. This move was purportedly taken as a sign of closer ties between China and Russia and to protect their economies from the declining US Dollar which both countries used in the past to settle bilateral trade debts.

China and Russia pact repudiates the US Dollar
In negotiating the bilateral trade pacts between their two countries, the representatives of Russia and China agreed to use their own currencies for future trade settlement. In making this agreement, the two countries chose to move away from the dollar which both were accustomed to using for trade settlement.
China experts said the decision to move away from the dollar should not be seen as a challenge to the US currency, but merely to provide safeguards for their own respective economies.

Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, was quoted as saying “the new mode of trade settlement between China and Russia reflected a global trend after the financial crisis exposed the faults of the dollar-dominated world financial system.”
The move to go away from the dollar to settle bilateral trade also came in the wake of China opening its interbank market for trade of Russian ruble against China’s currency -- the yuan. Likewise, Russia has committed to allowing the Chinese yuan to trade against the ruble in Russia.

China and Russia sign 12 pacts
During their meeting, Putin and Wen signed 12 economic pacts designed to bolster their respective economies including documents which covered cooperation in the areas of energy, aviation, railroad construction, customs, and protecting intellectual property rights.
While details of the documents have yet to be released, one pact included the sale of two Russian nuclear reactors to China’s Tianwan nuclear power plant. For future consideration, Putin is looking for more opportunity to boost sales of natural resources to China including gas supplies, but negotiating an agreeable price has proven to a formidable obstacle.

China and Russia forge stronger ties
Russian premier Vladimir Putin remarked that closer ties with China have come as a result of the consolidated financial systems of the world in recent years. For their part, Chinese Premier Wen Jiabao declared the intention of his regime “to support the renaissance of Russia as a great power.”
Furthermore, Chinese Premier Wen said that Beijing is willing to boost cooperation with Moscow in the Northeast Asia, Central Asia, and Asia-Pacific regions in pursuit of a more fair and reasonable new order in international politics and the economy.

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