Russia Swaps US Dollar for Chinese RMB; Holds 25 Percent of Global Reserves

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As we reported in our previous article concerning Russian dedollarization, the extent of how much Moscow has instead been turning to the Chinese RMB has only just become clear.

While we already stated that Russia’s central bank has drastically reduced the share of the US dollar in its international reserves (24.4 percent of Russia’s total reserves) and has boosted its holdings in Euros (32 percent) and Chinese RMB Yuan (14.7 percent) – what has not been understood is exactly what this means and is it a harbinger of any particular trend.

In fact, Chinese RMB as a currency currently represents about 15 percent of total global currency holdings. Despite the US-China trade spat, this is at 10 percent up as of the end of the last quarter of 2018. Russia, meanwhile, holds around 10 times more Chinese RMB than other central banks do, and has accumulated about 25 percent of the total world reserves in Chinese RMB.

Russia is making a strategic shift in its reserves towards holding fewer dollars and more assets in other currencies, with the RMB and Euro being most favored. On the trade aspect, this makes sense, Russian trade with the US is close to zero, while with China it has been expanding fast – there are suggestions of it hitting US$200 billion in five years – a 20 percent increase year-on-year, every year from now.

The statistics echo data provided by analysts at Morgan Stanley, who have stated in their research that Russia accounted for 90 percent of the inflows into the Chinese bond market in the first half of 2018.

Moscow’s dedollarization plan is seen as an effective move to stimulate economic growth and shield the economy from US sanctions, several rounds of which the US has already imposed upon Russia and a range of other countries including Iran and Turkey. In a parallel counter-dollar push, the international community has recently been prioritizing purchases of gold.

According to data provided by the World Gold Council, international central banks have bought as much as 148 metric tons of gold, which is 22 percent more than the same period last year. The Bank of Russia is leading in the purchases, which stood at 92 metric tons as of the end of 2018, thereby entering the top five gold-holding nations. Meanwhile, gold prices reached a six month high last month with money managers turning to the metal in the face of global economic uncertainty. Both Turkey and China have also been buying up gold reserves – both countries, which have lately been in arguments with the US, and, along with Russia, have chosen to dump large amounts of US Treasury securities over the course of the past year.

Chris Devonshire-Ellis of Dezan Shira & Associates comments: “Global economists and analysts appear to be too fixated on the immediate short term while it is what is occurring on the horizon that is rather more meaningful. While I expect China and the US to reach a medium to short-term truce as regards their current trade disagreements, there are strong signs that China will not take kindly to future trade antagonism and especially if this starts to involve sanctions. To this end, there is marked collusion between China and Russia in dealing with the US in case of future problems. Dedollarization, the building up of alternative assets and the entire Belt and Road Initiative are all linked to seeing the Chinese economy eventually begin to untangle itself from the US. It is doing this slowly, carefully, and with the full support and understanding of Moscow. This places the primary market of the EU in a position of choice between becoming part of Eurasia or aligning itself with the US. However, the mechanism towards Europe eventually having to make this choice is already in motion.”

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Russia Briefing is produced by Dezan Shira & Associates. The firm advises international businesses on investing, setting up businesses and administering them throughout the Eurasian region, including Russia, China, India & ASEAN, and maintains offices and partners in each of these countries and regions. For assistance with investing in Russia, or for Russian businesses wishing to invest in Asia, please contact Maria Kotova at or visit us at

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