Russia has approved China’s Industrial & Commercial Bank of China (ICBC) for providing Chinese RMB clearing services in Moscow, with the service operating from March 22. The facility eases the use of RMB as a trading currency between the two countries, and expedites the use of transactional settlements in financial services and co-operation between them.
Russia’s central bank announced the inclusion of the Renminbi in its national foreign exchange reserves at the end of 2015.
The move to permitting settlement in RMB is one of many strategic positions the Russians have been taking in the wake of financial and trade sanctions placed upon it by the US and EU, who are now losing leverage over Moscow as the country turns East to look for alternative trade partners. China, India and Singapore are among many Asian countries looking to sign free trade agreements with the Moscow backed Eurasian Economic Union (EEU), while Russia is a key regional player in China’s One Belt, One Road initiatives.
Russian trade with China and Asia has been picking up after an initial dip immediately following the impositions of sanctions. Chinese companies are strongly involved with the development of the Moscow-Kazan high-speed rail link, and ultimately hope to link this all the way through to Beijing.
China is both a buyer of Russian commodities as well as a supplier of goods. Russia has not been especially innovative when it comes to the processing of its raw materials, with everything from lumber to oil and gas having added value performed by the Chinese, often located at Chinese border cities with Russia, such as Manzhouli, which is just across from Zabaykalsk with a free trade zone that allows residents from both sides to cross visa free and common use of the roble either side.
Domestic opportunities exist in Russia for adding value on the Russian side of the border for commodities exported to China. At present, however, most opportunities for Russian business exist in trading; Chinese goods remain competitive. Setting up trading companies with import-export licenses is relatively easy and cost-effective, while Hong Kong also offers an international hub for Russian trade with China.
Russian entrepreneurs would do well to examine setting up a sourcing base in China, and with better distribution awareness than the Chinese have in Russia, could well find themselves competitive and profitable.
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