China Launches Yuan-Ruble Payment System

The monetary regimes of China and Russia, two of the world's most resource-rich nations, are drawing closer with every passing day.

In the latest push for convergence, China has established a payment versus payment (PVP) system for Chinese yuan and Russian ruble transactions in a move to reduce risks and improve the efficiency of its foreign exchange transactions. The PVP system for yuan and ruble transactions, designed to streamline commerce and curency transactions between the two nations, was launched on Monday after receiving approval from China’s central bank, according to a statement by the country’s foreign exchange trading system.

It marks the first time a PVP system has been established for trading the yuan and foreign currencies, said the statement, which was posted on Wednesday on the website of the China Foreign Exchange Trade System (CFETS). PVP systems allow simultaneous settlement of transactions in two different currencies.

According to CFETS, the system would reduce settlement risk as well as the risk of transactions taking place in different time zones, and improve foreign exchange market efficiency. Of course, if the two countries had a blockchain-based settlement system, they would already have all this and much more.

CFETS said it plans to introduce PVP systems for yuan transactions with other currencies based on China’s Belt and Road initiative, and complying with the process of renminbi internationalization. Russia, however, is a top priority: the world's biggest oil producer recently became the largest source of oil for China, the world’s top energy consumer.

To be sure, the monetary convergence between Beijing and Moscow is hardly new. The most notable recent development took place in April, when the Russian central bank opened its first overseas office in Beijing on March 14, marking a step forward in forging a Beijing-Moscow alliance to bypass the US dollar in the global monetary system, and to phase-in a gold-backed standard of trade. As the South China Morning Post reported at the time, the new office was part of agreements made between the two neighbours "to seek stronger economic ties" since the West brought in sanctions against Russia over the Ukraine crisis and the oil-price slump hit the Russian economy.

At the time, Vladimir Shapovalov, a senior official at the Russian central bank, said the two central banks were drafting a memorandum of understanding to solve technical issues around China’s gold imports from Russia, and that details would be released soon, to which we said that If Russia - the world's fourth largest gold producer after China, Japan and the US - is indeed set to become a major supplier of gold to China, the probability of a scenario hinted by many over the years, namely that Beijing is preparing to eventually unroll a gold-backed currency, increases by orders of magnitude.

Furthermore, also around the same time, as the Russian central bank was getting closer to China, China was responding in kind with the establishment of a clearing bank in Moscow for handling transactions in Chinese yuan. The Industrial and Commercial Bank of China (ICBC) officially started operating as a Chinese renminbi clearing bank in Russia on Wednesday this past Wednesday

"The financial regulatory authorities of China and Russia have signed a series of major agreements, which marks a new level of financial cooperation," Dmitry Skobelkin, the abovementioned deputy head of the Russian Central Bank, said. "The launching of renminbi clearing services in Russia will further expand local settlement business and promote financial cooperation between the two countries," he added according to.

Irina Rogova, a Russian financial analyst told the Russian magazine Expert that the clearing center could become a large financial hub for countries in the Eurasian Economic Union.

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The creation of the clearing center, and the launch of PVP systems enables the two countries to further increase bilateral trade and investment while decreasing their dependence on the US dollar. It will create a pool of yuan liquidity in Russia that enables transactions for trade and financial operations to run smoothly. In expanding the use of national currencies for transactions, it could also potentially reduce the volatility of yuan and ruble exchange rates. The clearing center is one of a range of measures the People's Bank of China and the Russian Central Bank have been looking at to deepen their co-operation, Sputnik reported.

But one of the most significant measures under consideration is the previously reported push for joint organization of trade in gold.

In recent years, China and Russia have been the world's most active buyers of the precious metal. On a visit to China last year, the deputy head of the Russian Central Bank Sergey Shvetsov said that the two countries want to facilitate more transactions in gold between the two countries.

"We discussed the question of trade in gold. BRICS countries are large economies with large reserves of gold and an impressive volume of production and consumption of this precious metal. In China, the gold trade is conducted in Shanghai, in Russia it is in Moscow. Our idea is to create a link between the two cities in order to increase trade between the two markets," First Deputy Governor of the Russian Central Bank Sergey Shvetsov told Russia's TASS news agency.

In other words, China and Russia are continuing to shift away from dollar-based trade, to commerce which will eventually be backstopped by gold, or what is gradually emerging as an Eastern gold standard, one shared between Russia and China, and which may day backstop their respective currencies.

Meanwhile, the price of gold continues to reflect none of these potentially tectonic strategic shifts, just as China - which has been the biggest accumulator of gold in recent years - likes it.


Yen Cross Fri, 10/13/2017 - 00:21 Permalink

 Finally!  Two years too late!  You know when the assclowns that run the show are scared, when they get silent.  I'll bet Jim Rickards has a twelve foot boner!

Anteater Yen Cross Fri, 10/13/2017 - 00:41 Permalink

Rickards is the worst kind of goldbuggerer. This PVP systemhas absolutely no effect on petrodollars. China has completelyfilled their SPR and has a surplus. They have little to trade theRussians for oil, the Russians have no money outside the State.So what's China going to do with all those excess rubles, whichPutin has been QEn'ing just as fast as any Central Bank? Chinahas cement and steel to trade, but again, what will Russia build?No Chinese is going to put hot money into Russian R/E condos.This is a very insignificant move to reduce cost of settlements.To get a big move, you need empire triangle trade. Englandbrings slaves to America, gets raw materials in trade andsell their manufactured goods back to America. So will Chinatrade the Tibetan slaves to Russia for timber, oil and wheat,then sell Russians household goods? Rickards has no clue!None of this rises to the level of being important news.

In reply to by Yen Cross

ThinkAgain Fri, 10/13/2017 - 00:28 Permalink

Just like in nature bio-diversity delivers system strenght and monocultures are far more weaker: a multi-polar-currency world delivers a more stable global financial (and thereby economic) system: see… for details (also on EQE/EBS backing of currencies instead of the only by uinilateral global power backed dollar system). See also for a new non-US more just globalization model.

Yen Cross Fri, 10/13/2017 - 04:13 Permalink

   I went over to 'Seeking Alpha' and layed some wood. Haven't been there in years, but my passwords workedThere's no forum, and the people that have ideas are "brain washed".  

Jack Oliver Fri, 10/13/2017 - 05:40 Permalink

Jim Willie predicted this - he also knows the US treasury bonds are being bought by the FED and hidden in countries like Belgium ( creating FAKE demand )

Willie is a little ahead of curve - he cops a lot of shit - but is ultimately right !!

tailgunner Fri, 10/13/2017 - 06:56 Permalink

A good article Tyler, but if you read the subscriber article of Jim Wilie, he forcasted this long ago.  Also the gold backed trade note is alive and well now for about two weeks.  What does China do with the Rubles?  Trade them for more gold.  He who has the gold makes the rules.  The price of gold in this venue is much higher than comex.  One day this will blow comex apart at the seams. LMA also.  The dollar is worth nothing, no backing.  So what will the trade world take?  Worthless SDRs, no they are just lipstick on the pig.  A new world is coming but not what the elietes want, that is for sure.  They cannot touch Russia and China, war or no war.  Why do you think the sanctions have been laid on Russia?  They tried to break their economy, but no such luck.  They just made it all happen sooner.

Faeriedust tailgunner Fri, 10/13/2017 - 20:08 Permalink

If they had bothered to read the history of even the last century, they would have known that they couldn't break the Russian economy.  That was a pipe-dream from the word go, and if that was honestly their expectation . . .  then they are fucking idiots.<Sigh>.  Makes me realize that if I had followed in the path my family tried to lay out for me, I could have been running half the U.S. government by now, just because even in DC, 90% of everything is crap.

In reply to by tailgunner

RedBaron616 Fri, 10/13/2017 - 07:13 Permalink

For all you who think this is the end of the US Dollar, you have left out one key fact: The Yuan is manipulated by Red China's central bank which answers only to the Chinese Communist Party and is backed by nothing. What could possibly go wrong?

WTFUD RedBaron616 Fri, 10/13/2017 - 09:38 Permalink

Listen up bud, this is far bigger than your childish perspective.

' By land and by sea through transport networks, telecoms, energy pipelines and industrial hubs it {China & Friends} promises to Integrate 60 countries & 60% of the World's Population'.

Now should the EU or Japanese or Anyone wish to purchase Energy or a plethora of products the transaction will pass through a Yuan Exchange.

Most of the EU boys to their Credit have signed up already! Jealousy is a big Disease.

In reply to by RedBaron616

WTFUD Fri, 10/13/2017 - 09:17 Permalink

No Goldman or JPM Commissions! That's an outrage!

Now Russia can request Yuan or Rubles or Gold for their Oil & Gaz if the EU don't wake the fuck up and throw the US monkey off its back.

surf@jm Fri, 10/13/2017 - 09:37 Permalink

Good.........And as soon as they are stinking rich, maybe we can send all the refugees of the world to them for succor, for a change......

gdpetti aldol11 Fri, 10/13/2017 - 19:57 Permalink

True, and we've forced them to do so earlier... as approach the end of the road... but China's CB has been issuing fiat to catch up with Japan and the West... Russia is one of the only ones not to do so due to sanctions.... I wonder what kind of 'float' is applied to the exchange?

In reply to by aldol11

outsider9 Fri, 10/13/2017 - 10:39 Permalink

it is interesting to think gold has some kind of value or usefulness. The dollar was king for the time people found oil to be necessary, but alternatives are being created. The objects of desire and need have value, but bartering may some day makes its way back into the global society.