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

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
css1971's picture

Yeah they can.

They could engineer a crash and dump treasuries into the welcoming arms of the US markets. The Fed will step in to support the markets with more QE. It'd be almost a direct transfer to the Fed's balance sheet at bond market highs.

Monty Burns's picture

The point talisman is making is that this would not crash the $ because it still retains enough credibility (for whatever reason) to keep the Ponzi going a bit longer. Hence now is a good time to cash out.

Rock On Roger's picture

 Geobbels


"Rule "10. Material from enemy propaganda may be utilized in operations when it helps diminish that enemy's prestige or lends support to the propagandist's own objective."






 

Quaderratic Probing's picture

China makes non USD trade deal in worthless Roubles now tries to save face.

There fixed

russwinter's picture

There is even more to this story:

COLD WAR 2.0: THE OLD MAID CARD OPTION 

http://winteractionables.com/?p=17261

 

TeethVillage88s's picture

That is the thing about Creating money that stays out of the country it drips and dribbles back in and if you have $5 Trillion Printed already... well who is to know about $100 billion or so.

The Duke of New York A No.1's picture

The PBOC takes Gold Bullion as collateral.

scatha's picture

Oh Boy. The DE-DOLLARIZATION is accelerating faster than I thought. It's a pity that most of ZH crowd cannot comprehend importance of these events. I will try to simplify it.

We have to understand that, it's not about supporting ruble v.s. dollar. It is irrelevant for government but pain in ass for regular Russians. Russia and China doesn't care about it at all. They have all the money to do it. What this is about, is to purge dollar from world trade and recover internal assets on cheap but not through selling China three trillion $ reserves and collapsing dollar right away but to artificially raise dollar trade value (induced scarcity) temporarily against most currencies until the dollar/euro/yen dump for world commodities is completed. Also as Putin, calling to repatriate Russian money from abroad with no taxes or questions, meant was that soon dollar will be worthless in the east, so use this opportunity to buy ruble or yuan with profit and bring it home.

To do that China can use Russia and other nations swap agreements to remove dollar (double) trade and demand to trade in yuan and other counter currencies. And what’s most important removing dollar as a intermediary of exchange rate setup, perhaps, fixing the rates. For example: 5 ruble = 1 yuan fixed. You get it, asian Bretton-Woods man. And then let dollar and euro float into oblivion since nobody, except US vassals would need it for nothing. To buy stuff yuan, ruble etc. will be needed. West: US, Europe, Australia, Japan was emptied out of production of any real stuff, long time ago, they were reduced to LEGO builders that’s all. West has one thing to offer, paper. Most western brand and labels are already own by Chinese and produced in China. All western technology stolen. Nothing left.

China is looking ahead 100 years, Russia 50 years, and US 10 minutes which is attention span of American watching Kim Kardashian butt. More then that would be a suicide.

Who should we trust? Take your wild guess.

TeethVillage88s's picture

It fits a US narrative of wealthy elites moving in on the American Idea which might have been invented by the Masons.

- USA Resources & Labor had to be developed like the East India Trading Company and the Hudson Bay Trading Company
- USA People had to be encouraged to move Westward to discover resources and help displace Native Indigenous peoples

Today:

- US Labor Rate has been high since 1970s Worker Rights Laws and Worker Safety Laws
- US Land has been largely allocated and is being reallocated at some expense
- US Resources are fairly well known and are being exploited at a moderate or quick rate
- Process of Decapitization or Post Modern Industrial phase has been well under way with Outsourcing, Off Shoring, and Tax Shelters out of country
- Corporate Tax rates are moderate at 12.7%

Problems:

- Federal Government Debt Overhang means Risk to Infrastructure, Energy Rates, Utilities Rates, and Future Corporate Tax Rate
- Population has much claim on real property, but is not high enough to sustain the Federal Debt

Advantages:

- Lawyers, Bankers, Politicians have complete control over courts, laws, and government regulators for the most part
- Corruption is at a comfortable level for all concerned
- Anti-Trust Laws are largely forgotten especially in Banking & Finance

Best Course of Action: Continue to leverage credit while using all cost cutting methods to shed employees in the USA, maximize Robotics & Automation, while using cheap foreign labor and Black Market Labor or Slave Labor off shore

Aaron Hillel's picture

Scatha, theoretically, yes

In practice, the chosenites will not allow the dollar to float into oblivion, as it would mean an end to their capacity to impose their international banditry by force of arms.

The nuclear option may be off the table or it may not, we dont know.

Conventional war on ru/chi duo? I think we can rule it out, even the chosenites arent that stupid.

Do you think the psychopathic oligarchs of washington-tel aviv axis will meekly declare their dream of global domination void , say sorry and go home?

So, where does it leave us?

scatha's picture

That's why American oligarch class wants global war, more then ever, before secret is out that they already became senile. Russia and China, in contrast, wish for peaceful surrender of US/West interest, against simple fact that it never happened before in history of civilization. Never, dying emporium relinquished its dominance in world trade without war if there was any serious contender to power. I am afraid US won't be the first.

22winmag's picture

The world leader in shitting on the side of the road is going to "bail out" mother Russia.

 

Now I've heard it all.

fel.temp.reparatio's picture

So, do they face traffic or away from traffic..? I'm just curious.

safedisk's picture

I am calling this sunday as a potential for a major event.

Remember the elites love of 7?

21/12/14

21=3 sevens

14=2 sevens

3+2=5

5+7=12

21   12   14

 

Whadya think?

kchrisc's picture

"Remember the elites love of 7?"

No, they love to steal and kill. Any day will do.

"Cookies" Nuland prefers war around the 18th. of each month. If you know what I mean.

An American, not US subject.

fel.temp.reparatio's picture

That's not exactly how numerology works... ultimately, everything is reduced down to the numbers 1-9.

Thus 21-12-2014 would be 3+3+7=13, futher 1+3=4... in a nutshell.

Ahoy Polloi's picture

I think you think too much.

no more banksters's picture

"It appears that the SCO formation in 2001 was another tactical win by the Sino-Russian block, against the - occupied with the war on terrorism - West, to be used against future plans by the global neoliberal dictatorship, which would probably include the dissolution of the vast Russian territory and the dangerous isolation of China by land and sea."

http://failedevolution.blogspot.gr/2014/09/cold-war-20-chinas-moves-to-a...

css1971's picture

Meh. Ruble crisis over.

17% is crucifying the bankers who were shorting the currency, their balls are being squeezed till they squeek. Give it a month, maybe a quarter to make sure and they'll reduce the interest rate because the Ruble is appreciating too quickly.

Putin is "Da man" who gets what needs to be done, done...

pendragon's picture

the big move was the oligarchs cashing out. the crisis is in its infancy.

css1971's picture

It's over & done with.

Here's the fundamental difference between the US and Russia. The US is run by financiers and bankers. Russia is run by killers.

Putin will personally get in your face, take you down and choke you till you stop breathing, he practices that stuff every other day. OBama will try to drone you from 3000 miles away.

Bankers and financiers are fundamentally cowards. They want their power, influence by proxy and their rewards but are terrified of pain. They spend their professional lives avoiding risks. That's America today. Freedom without responsibilty, reward without risk. It's a mistake to project that mindset on to Russians.

pendragon's picture

he's a politician. he just admitted the crisis will last 2 years (putin won't last 2 years). read the text.

css1971's picture

No, the (Ruble) crisis[1] is now over. Oil prices may be depressed for up to 2 years[2], and here's the key point in that part of the transcript. He's going to leave the market to solve it's own problems. It's pretty clear that Russia is now more capitalist than America.

 

[1] The word crisis comes from the greek for turning point.  Well, the Ruble turned on the 16th.

[2] Seems unlikely to me. US producers will start to collapse well before that point & reduce production. 2 quarters at most.

lakecity55's picture

Or, Bath House is a pussy, Vlad is OG

Panic Mode's picture

In the east, we call 'Comrades'. In the west, we call 'Zionist'.

TeethVillage88s's picture

Despite its military strength, the Bush II dynasty did not last long. When the G.W. Bush was replaced by the Oligarchs of Western Europe in 2008. His successor to the Throne B. Obama divided the Empire into many political factions and a stronger faction appeared in Western Europe.

Attempt by the remaining Bush II dynasty under B. Obama to influence and control the Empire promoted war, corruption, disinformation, secrecy, and disunity as well as Regional Wars. The advisers squabbled among themselves, however, which resulted in both their deaths and that of other potential successors to the Empire both in Western Europe and the former Region called the United States. Popular revolt broke out a few years later, and the weakened empire soon fell to a Neocon lieutenant, who went on to found the Walker dynasty.[note 1]

/S

lakecity55's picture

Bankers' Day

A day celebrated in the neo-American Republics to celebrate the times when banksters hung like many blood-red ornaments on a Christmas Tree.

hedgiex's picture

Keep smoking that China has anyone back. They are  sitting pretty with $/RMB up. They want to upset this ?

pendragon's picture

a few throwaway lines from SAFE = fully fledged bailout. get with the program

reader2010's picture

What unfolding right in front of our eyes is rapid forming of two camps ready for soon-to-come great WW3, in which the US will repeat the fate of Nazi Germany. For those who don't want to shrug it off,  time to see goodbye has finally arrived. 

Kina's picture

American Patriot bitchezs!

I think he has become an object of amusement aka MillionDollarbonus (who was acting the role only)

LoL

vyeung's picture

The US just signed its USD death certificate!

lakecity55's picture

Kyle Bass, stunned, in cafe..

"What is up, Kyle?

"They...saiod they were gonna kill the dollar...our own guys..."

Livermore Legend's picture

Indeed....

Kyle Bass is another Wall Street Hack who tries to project that he is "In the Know"......

That particular Dollar episode, in and of itself, Proves this:

Anyone who truly understood Markets would know that not even POTUS can "Kill the Dollar", even if he wanted to........

No Individual or Group of Individuals have the Power to "Kill the Dollar".......

Believing this, Peddling this, and even Worse Acting on it, only shows that like Whip Cream when you begin to dig down, you see there isn't much Substance....

 

kchrisc's picture

When is it best for the Zionists to tangle with a nuclear armed opponent, and there is little risk to them? When you can tangle with two nuclear armed opponents and still run little risk of bearing the brunt of any retaliation.

"DC US war-dog, you're up at bat again."

An American, not US subject.

Red, white and blue? The the red stands for the blood that we Americans shed for the white and blue.

valley chick's picture

Anyone watching Putin in the live broadcast? Interesting indeed.

kchrisc's picture

Here is a interesting thing to ponder:

If the DC US nuked China today, in about a month or two there would be nothing for purchase at nearly all the stores in the DC US. Nothing in Harbor Freight, Walmart, Target, Toys R Us, Kohl's, The Pleasure Chest, PetSmart, Pepboys, Best Buy, Bed, Bath and Beyond, Costco, Sams, Ace Hardware, RadioShack,...

I wonder what John Nash would have to say about that?

An American, not US subject.

falak pema's picture

neo-Alexander Nevsky having bended knee to neo-Kublai Khan in Xanadu, the neo-Mongol Empire makes it presence felt to the neo-Teutonic order of Mutti-EU, surrogate to neo-Pope of WS and neo-Holy Emperor of DC. 

We are back in the obscurantist Middle Ages with a vengeance; where Corporate neo-feudals roam the world looking for spice (ukrainian/thai pussies), gold (black type), silk (Ali Baba cheap labour) and gems (rare earths-uranium) of the Orient (BRIC +Africa). 

To put it more in terms of the Americanese of our age : "All along it was Barzini" says neo-con Don C sitting in DC !

Barzini in Xanadu has the smile of the proverbial cheshire cat !  Who can bell that cat ???

Play on Oligarchs. 

Tinky's picture

Brings back memories of my first viewing of brilliant Eisenstein film, Alexander Nevsky.

Monty Burns's picture

What the f*ck are you on about?

falak pema's picture

The Man said : Our Money, your problem. It started the Pax Americana petrodollar roll.

I say : Our History, your problem. It may start (these current events) -- if I get the article right-- the petrodollar unroll.

Read Plutarch's Lives (parallel trails of tales in history)  and you may find the light. 

Monty Burns's picture

I ask again, why don't the Russkies offload their US T-Bills?

1stepcloser's picture

Belgium loves T(eldar)-Bill Paper

Quaderratic Probing's picture

Because they are going up in value

AdvancingTime's picture

A great shift in power to the East continues.  The struggle to unseat America as the worlds most dominate nation continues. For many proud Americans who see the United States as having a right to be in control it is both threatening and frustrating to see that control slip away.

It is threatening to think the country might quickly fall to the position of a second rate power mired in debt with many of the options we have come to see as our right suddenly ripped away. It is frustrating that in many ways America appears to have become its own worse enemy guilty of political inaction and squandering its power through a series of bad choices and missteps. More in the article below about the continuing massive shift in power to Asia and how America must immediately face its problems to set its house in order.

 http://brucewilds.blogspot.com/2014/06/americas-struggle-to-stay-on-top.html