Comment on Russia can rely on China for the yuan, but China can't rely on anyone else

Russia can rely on China for the yuan, but China can't rely on anyone else

Chinese President Xi Jinping and Russian leader Vladimir Putin.Contributor/Getty ImagesWestern sanctions have forced Russia to rely on the Chinese yuan for reserves and trade.China is concerned about sanctions, too. But unlike Russia, it lacks alternatives to the dollar.China's financial system is deeply tied to the greenback, limiting diversification options.Sweeping Western sanctions against Russia have isolated its economy so much that it now relies on the Chinese yuan for its reserves.Russia's isolation has also worried China — whose $18 trillion economy far outsizes Russia's $2 trillion — about relying on the US dollar-based financial system, prompting calls in the country to reduce the exposure of its financial system against the greenback.However, unlike Russia, Beijing has far fewer alternatives, wrote Robert Greene, a non-resident scholar at the Carnegie Endowment Asia Program and Cyber Policy Initiative."Russian authorities diversified the country's foreign exchange reserves in large part by buying renminbi assets, but a similar option is not possible for Chinese authorities," wrote Greene on Thursday.There are many reasons for China's de-dollarization limits.These include the entrenched role of the greenback in the global commodities trade and much larger foreign reserves than Russia, wrote Greene, a former senior advisor at the US Treasury.

 

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