China Prepares To Bailout Russia

Tyler Durden's picture

Earlier this evening China's State Administration of Foreign Exchange's (SAFE) Wang Yungui noted "the impact of the Russian Ruble depreciation was unclear yet, and, as Bloomberg reported, "SAFE is closely watching Ruble's depreciation and encouraging companies to hedge Ruble risks." His comments also echoed the ongoing FX reform agenda aimed at increasing Yuan flexibility which The South China Morning Post then hinted in a story entitled "Russia may seek China help to deal with crisis," which which noted that Russia could fall back on its 150 billion yuan ($24 billion) currency swap agreement with China if the ruble continues to plunge, that was signed in October. Furthermore, two bankers close to the PBOC reportedly said the swap-line was meant to reduce the role of the US dollar if China and Russia need to help each other overcome a liquidity squeeze.

 

As Bloomberg reported, earlier in the evening, China's Wang Yungui noted

  • *CHINA IS CLOSELY WATCHING RUBLE'S DEPRECIATION: SAFE'S WANG
  • *CHINA ENCOURAGES COS. TO HEDGE RUBLE RISKS, SAFE'S WANG SAYS
  • *REAL IMPACT OF RUBLE DEPRECIATION UNCLEAR YET, SAFE'S WANG SAYS

Adding that China plans sweeping reforms to promote FX flexibility.

And then The South China Morning Post hints,

Russia could fall back on its 150 billion yuan (HK$189.8 billion) currency swap agreement with China if the rouble continues to plunge.

 

If the swap deal is activated for this purpose, it would mark the first time China is called upon to use its currency to bail out another currency in crisis. The deal was signed by the two central banks in October, when Premier Li Keqiang visited Russia.

 

"Russia badly needs liquidity support and the swap line could be an ideal tool," said Bank of Communications chief economist Lian Ping.

 

The swap allows the central banks to directly buy yuan and rouble in the two currencies, rather than via the US dollar.

 

Two bankers close to the People's Bank of China said it was meant to reduce the role of the US dollar if China and Russia need to help each other overcome a liquidity squeeze.

 

China has currency swap deals with more than 20 monetary authorities around the world. Swaps are generally used to settle trade.

 

"The yuan-rouble swap deal was not just a financial matter," said Wang Feng, chairman of Shanghai-based private equity group Yinshu Capital. "It has political implications as it is a sign of mutual trust."

 

The rouble has lost more than 50 per cent against the US dollar this year, pushing Russia to the brink of a currency crisis, though measures announced by the central bank helped it recover some ground yesterday.

 

Li Lifan, a researcher at the Shanghai Academy of Social Sciences, said the swap would not be enough for Russia even if it is used in its entirety. "The PBOC might agree to extend something like 15 billion yuan initially as a way of showing China's commitment to Russia."

*  *  *

As we discussed in October when the swap deal was signed,

...as if to assure all involved parties that there will be enough capital support on both sides, the PBOC released a surprising announcement that the central banks of China and Russia signed a 3-year, 150 billion yuan bilateral local-currency swap deal today, according to a statement posted on PBOC website. Deal can be expanded if both parties agree, statement says. Deal aims to make bilateral trade and direct investment more    convenient and promote economic development in 2 nations.

 

To be sure, some such as Bloomberg, are skeptical that the unprecedented pivot by Russia toward China as it shuns the west, will merely harm the Kremlin. Others, however, wonder: who will be left standing: Europe, with its chronic deficit of energy and reliance on Russia; or Russia, a country overflowing with natural resources, whose economy is currently underoing a dramatic and painful shift, as it scrambles to dissolve all linkages to the Petrodollar and face the Gas-O-Yuan?

*  *  *

Is 'isolated' Russia about to be bailed out by the world's largest economy China?

 

Perhaps, they already started...

 

But then again - with the BRICS currencies all turmoiling... (ZAR -22% not shown)

 

Perhaps it is not such a surprise as members take advantage of The BRICS Bank's $100 Billion reserve...

The punchline, however, is that using bilateral swaps, the BRICS are effectively disintermediating themselves from a Fed and other "developed world" central-bank dominated world and will provide their own funding.

We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements.... The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures. 

Incidentally, the role of the dollar in such a world is, well, nil.

For those who have forgotten who the BRICS are, aside from a droll acronym by a former Goldman banker, here is a reminder of the countries that make up 3 billion in population.

 

Chart: Bloomberg

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Wild Theories's picture

I have reached a likewise conclusion on that quote

no Chinese I know knows where that phrase came from in Chinese

and none-English speaking Chinese(in China) aren't even aware of the phrase's existence, the only ones who's heard of it are ones who speak English

OldPhart's picture

Probably something from a Charlie Chan movie.  That sort of shit creeps into cultural memory without any attributable source.

 

http://www.ask.com/wiki/May_you_live_in_interesting_times?o=2801&qsrc=999&ad=doubleDown&an=apn&ap=ask.com

 

Colonel's picture

Though it's probably already been said why don't both countries tie the Yuan and Ruble to the gold standard. Between them both they have alot of gold.

SilverIsMoney's picture

They aren't ready... If you believe Jim Willie it's because they are still trying to get Germany to join them. If that happens it truly is game over for the US and that may be why the US refuses to give Germany their Gold back.

Amerikan Patriot's picture

You want it to be 'game over' for the US, don't you?

Are you willing to take concrete physical actions in order to harm the US, Bob?  If so, please elaborate.

McMolotov's picture

No one can take him seriously as long as he keeps mistaking everyone for Bob Barker.

Latina Lover's picture

Hey Amerikan Patriot NOT, do you get paid extra if you set someone up for a bogus terrorist charge?   It is creeps like you who are destroying our republic.

JAFAH's picture

The hasbara troll sounds a bit desperate, and agressive...Bob indeed.

MsCreant's picture

I don't know what kind of troll it is, but it is way too obvious. Desperate and aggressive and weird. WTF.

Ahoy Polloi's picture

In the original [Bruce Willis/Brad Pitt/Mad Stowe] version of 12 Monkeys, the toothless hobo kept calling everyone 'Bob'

noben's picture

Americant Parrot, are you at all capable of providing a cohesive, cogent and compelling Argument for any of your views, or are you just slap happy to be able to heckle on a typical day and copy/paste on a good day? Just curious.

petkovplamen's picture

Serious question to Amerikan Patriot:

What exactly about "Amerikkka" are you patriotic about? the 400+ years of slavery? The Native American genocide? The fake beginings of WWII, the fake Pearl harbor attack, the fake Gulf of Tonkin attack, the fake 9-11 attack, the Snowden's revelation that the US gov spies on its citizens,  the fake wars on terror, the 1% of Americans owning 50% of all wealth in USA, the lies of SHrub. Chenye, Obama about imaginary WMD, fake Al Queda, fake ISIS, what exactly, please tell us once and, for all?

OldPhart's picture

I, for one, do, 'Bob'.

NSA Troll?

 

Amerikan Patriot Relationships
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a common man's picture

He sure ain't no Paul Revere,

(he probably have to look that up to see who I am talking about)

RaceToTheBottom's picture

On other boards, there was a prolific poster called AP or American Patriot.  He/she was anti gold and kept saying revert to mean of 456$US.

I accused him of starting with left hand ring finger and rolling to the right to come up with that analysis....

bid the soldiers shoot's picture

 

You keep popping up like pimples on Obutta's ass.

SickDollar's picture

big time troll check his history

 

CAN WE PLEASE BAN HIM

cornflakesdisease's picture

Germany will never be allowed to do that.  The FED boot is firmly on their neck and has been since 1945, just like Japan.

css1971's picture

There are US military bases all over Germany. Germany is still an occupied country.

HTH.

messystateofaffairs's picture

Why not play the fiat game first and keep buying cheap gold in the meantime. When fiat crashes then move to PM's. Which govt can say no to a little free money?

cornflakesdisease's picture

If they aren't willing to make it redeemable, they would quickly be found out and then it wouldn't matter.

nidaar's picture

Actually they might not really need that. The currency swap mechanism in essence creates the YuaRub. When they finish having their own swift system, all major trade on the east part of the world, that is except western Europe and N. America, will eventually switch to that. Then the role of gold will come into place.

It will be used as the conversion medium between EurUsd and YuaRub. We are heading towards a bipolar world, players have already started taking sides.

Amerikan Patriot's picture

Wow, the I-hate-America crowd is out in force tonight, isn't it?

Where do you folks draw the line as far as what you're willing to do to see the United States - the beloved homeland to many of you infidels here - defeated or replaced in world hegemony?

Are some of you folks planning actual physical attacks on the US, or is your hatred of America limited to mere words?

 

Amerikan Patriot's picture

McMolotov...hmm...that sounds rather suggestive of physical violence. 

Is that how you intended it, or are you really just a milquetoast and 'molotov' is simply an historical/literary reference?

McMolotov's picture

It's my hobby. I am but a humble clown who occasionally engages in some light arson.

bid the soldiers shoot's picture

Why do you spell AmeriKan with a Nazi German 'k', hypocritical dudeface?

Anusocracy's picture

Kindly refrain from making an ass out of yourself by equating America with the US government.

Most everyone here is not as stupid as you are.

messystateofaffairs's picture

I think you need to be stupid in order to want to work as a troll.

cornflakesdisease's picture

There is America and their are the globalist that hijacked it a long time ago.

https://www.youtube.com/watch?v=vwWJQ9PRFIs

OldPhart's picture

<---'thinking that the CIA/NSA WAY overpays the stupid'

suteibu's picture

Love America, hate its government.  Two completely separate entities. 

You've been here for over 4 months and haven't figured that out yet?

Amerikan Patriot's picture

Can you point me to some posts to this article that support that contention, Bob? 

All I read is vitriol and hate.  Nothing about love for country.  Maybe you can be the first poster to this article that expounds on your love for America.

Give it a shot!

suteibu's picture

Who the fuck is Bob, you arrogant ass?  Stop being such a piss ant and people might actually have a conversation with you.  But that isn't why you are here is it?

TheFutureReset's picture

I might be me, but "love for country" just sounds so fascist. Freedom is what I love, not some violence provoking love of country BS. 

Livermore Legend's picture

"Love for Country" springs from understanding our Storied History, and most importantly that "America" is NOT based on or about Individuals, rather an "Ideology of Liberty" that Transcends Humanity.....

If the USA said today we will allow ANYONE in any Country to come to the USA, literally Billions would come......

That is not Propaganda but REAL SUBSTANCE........ Illustrating and PROVING the Point......

Is there even ONE case of someone dying to GET INTO CHINA or RUSSIA ?

We have had Booms and Busts long before......and we will have them long after......

The "System" of the World is the Transfer of Wealth from the Hands of the Many to the Hands of the Few...... 

That has Never Changed and Never Will.......Because that is based on Human Nature.......

Greed and Arrogance are most Human Qualities........

EROEI is the Real Threat........

I'll take my Chances with the USA.......Come What May.....

 

 

SilverIsMoney's picture

LOL...CIA Plant? "aahhh are you boys planning any attacks" lolz...

https://www.youtube.com/watch?v=6fZZqDJXOVg

noben's picture

Can't be a CYA employee. Their IQ requirements are much higher than 90.

Nah, more like a subcontractor for a subcontractor. That's what happens with multi-level outsourcing, and "patriotic" piggies at the Gov trough eating up Margin. ;-)

Negative1's picture

Welcome to the Putin man boy love association. ZH is packed with shills, paid with wooden rubles.

MsCreant's picture

If you are going to do this stuff, be funny. Make us laugh and maybe you will get some respect regardless of your point of view. Insults without wit ain't gonna get it. I really don't know why you bother unless this is just pure trolling for the sake of the LULZ. Still, make it funny, I'll give you greenies. 

fel.temp.reparatio's picture

Dear 'Exceptional-istan' allegory-of-the-cave dweller... open your eyes, do you really like the way things are shaping up globally due to US hegemony? And BTW, America is more than capable of physically attacking itself. How awesome huh?!

palmereldritch's picture

The Chinese can always sell some USTs to free up space.

DaveyJones's picture

Never thought just how historically powerful that picture of the BRICS turns out to be

disabledvet's picture

This sounds like a Bear Hug to me.  What does China have to lose?

DoChenRollingBearing's picture

China will lose nothing.

Russia will lose it all.

cornflakesdisease's picture

I agree.  There were many many times China could have taken steps against the west and they didn't.  They and the US are number one trading partners and they never do anything to mess that relationship up (since 1971).  It's akin to the US / Saudi deal of "you price oil in dollars and no one will jack with your kingdom". China even is part owner of the FED via proxy of their banks (much like Deutsche Bank is part of the FED system and BOE).  http://usatoday30.usatoday.com/money/industries/banking/story/2012-05-09...

I really wonder if this is stealth statecraft to bring Russia under Chinese control.  When China went ahead anyway and bought Iranian oil, they did so at huge discounts ($50 a barrel when it was $100).  They are pretty wilely about getting the upperhand.

I'll have to study up on this development.