Russian investors find a short-term solution to Western sanctions against Moscow, experts say

According to experts, Russian businessmen are converting foreign assets into RMB for temporary hedging.

Converting foreign assets to Chinese yuan assets, according to experts, could be a short-term solution for Russian investors, subject to Western sanctions against Moscow.

Excluding major Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) excludes major Russian banks from the US-controlled international money transfer system. This severely limits Moscow’s trading capacity, but Russian investors can avoid it in the short term by holding assets in the Chinese yuan (RMB), North American investment specialist Mike Sun said in an epoch. I told the Times.

Given that sanctions are making Russia economically self-sufficient, Russian investors are looking for ways to minimize losses in the short term.

A Hong Kong banker told the Chinese edition of Nikkei Asia, a Japanese-based financial newspaper, that emerging market assets have recently been significantly converted to RMB assets.

According to the latest from SWIFT RMB TrackerThe share of the renminbi as a global settlement currency reached 3.2% in January 2022, the highest since 2015. In addition, RMB settlements increased by 10.85% compared to December 2021.

Meanwhile, the shares of the US dollar and the euro as global payment currencies have fallen slightly compared to December last year to 39.92% and 36.56%, respectively.

Usually, during unusual times such as war, people tend to sell their assets in more risky currencies and turn them into more reliable currencies such as the dollar and the euro. However, the global share and value of the renminbi is rising in the conflict between Russia and Ukraine, as some investors appear to see the yuan as a “risk-off” currency. “Risk off” refers to the sentiment of traders and investors in financial markets, reducing their exposure to risk and focusing on protecting capital.

In this regard, US private investment consultant Mike Sun suggests that the recent surge in RMB asset purchases is largely due to Russian investment. Many Russian investors are converting foreign assets to RMB assets to prevent or minimize short-term losses due to Western sanctions.

Current economic sanctions imposed on Russia by the United States and European countries have extended to the number of Russian millionaires, freezing foreign assets and funds. Many Russian investors are wary of these measures and have begun to convert foreign assets in major currencies such as the US dollar, euro and pound sterling (pound sterling) into the yuan to mitigate risk.

Many Russian businessmen own luxury homes in places such as the United Kingdom and the United States, Sun said. They saw the risk of sanctions and sold their assets and converted them into RMB assets for temporary hedging.

February 26, White House announcement Launch of “Joint Task Force to collectively search for licensed Russian companies and oligarchs’ physical assets: yachts, jets, luxury cars and luxury homes”. Similarly, England and France proceeded to freeze some Russian oligarch assets. BBC..

RMB assets could bring liquidity to Russia as about half of Russia’s foreign exchange reserves held in G7 countries freeze.according to Business Times Quoting data from the Central Bank of Russia, as of June 2021, about 13% of Russia’s foreign exchange reserves are assets of RMB Chinese, which is equivalent to about $ 77 billion.

China’s State Global Times announced on March 10 that the Chinese foreign exchange trading system doubled the yuan’s trading band in the Russian ruble in the interbank foreign exchange market to prevent currency arbitrage transactions following the recent plunge in the ruble. I reported that I was there. ..

According to the article, the RMB deposit service provided by Russia’s VTB Bank “has a major impact on the global currency system in an attempt to seek an alternative to the US dollar-centric system.”

Russia seeks to increase connectivity between the use of the renminbi and China’s international payment system and mitigate the effects of international sanctions.

According to China’s Hong Kong NetEase News Portal, the conflict between Russia and Ukraine has shifted the United States to Russia, creating a great opportunity for the Chinese yuan to internationalize and becoming a more active currency used worldwide. I did.

However, Sun said it would be very difficult for the Chinese yuan to achieve internationalization due to the basic premise that currencies must be freely exchangeable. Nevertheless, the Chinese Communist Party has tight control over its foreign currency exchange.

Ann Chan


Ann Chan is a writer of The Epoch Times, focusing on topics related to China. She started writing her Chinese version in 2014.