Recently, Hong Kong China News Agency interviewed Professor YU Miaojie, Deputy Secretary of the CPC Committee and President of Liaoning University. The original text and links are as follows:
Hong Kong News Network reported on September 7. On September 6, Gazprom announced that they signed an agreement with China National Petroleum Corporation, which states that the payment currency for Russian gas supplies to China will be changed from US dollar and Euros to the RMB and rubles. The economist interviewed by news institute said that directly switch to settlement in local currency of the two countries means it can bypass the US dollar, avoiding the hegemony of the US dollar and promoting the internationalization of the currency of the two countries.
The picture from CCTV News
Gazprom announced on its social media channels that the two companies signed a supplementary agreement to the long-term gas sales contract for the “Eastern Route”-“Power of Siberia” gas pipeline. The agreement determines the payment method will be settled in local currencies, the RMB and rubles. According to Bloomberg News, citing the person in the know, the payment for natural gas between Russia and China will be 50% in rubles and 50% in the RMB, with immediate effect.
On September 7, Professor YU Miaojie, President of Liaoning University and member of Economic and Trade Policy Committee of the Ministry of Commerce, said in an interview, the biggest significance of changing the payment currency of Sino-Russian natural gas trade is bypassing the US dollar, which is beneficial to internationalization of the currency of the two countries. For Russia, part of its foreign exchange reserves are being frozen by the United States. Directly switching to payment in local currency, in one hand, can avoid the hegemony of the US dollar and the hegemony of the United States based on the US dollar hegemony. In the other hand, it can also reduce financial and trade cost.
Professor YU Miaojie also continued to point out that, without doubts, in addition to simplify settlements, it also strengthens mutual trust in Sino-Russian relationship and promotes the process of “De-dollarization”. “If a country’s foreign exchange reserves including debts and assets are all in the US dollar, the country’s assets will decrease once Federal Reserve increases money supply. Therefore, dedollarization is conducive to the healthy development of a country’s foreign trade and it is also beneficial to the balance of a country’s financial system.
Mueller, President of Grazprom said that the new payment mechanism is a mutually beneficial, timely, reliable and practical solution which can simplify settlements. “Set an outstanding example for other companies and provide an impetus to the economic development of the two countries.
Since the Russian-Ukrainian conflict, in order to circumvent Western sanctions, Putin, the President of Russia, has bypassed the US dollar and asked countries receiving Russian gas in Europe to pay in rubles. In addition to China, gas transactions between Russia and Turkey will also be settled in rubles. Moreover, according to foreign media reports, Russia and India will not use the US dollar in oil transactions. Will more countries bypass the US dollar and trade with Russia in their own currency or yuan?
For above question, Professor YU Miaojie analyzed and pointed out, except for a few countries with international currencies such as the United Kingdom, the US dollar is still the most common currency in international trade. The country status will be improved greatly if using other monetary instruments or directly using local currencies for settlement. However, not very country can do this. The country must have a certain economic scale and international status, and the country’s currency should have certain credibility to ensure inflation rate will not be too high.
Will this settlement model be extended to other fields? Professor YU Miaojie said, “ The scope of operation is not limited to natureal gas, but can also extended to other raw materials, grain trade and other fields.”
Professor YU Miaojie further pointed out that it may form a regional currency if more large-scale countries adopt bilateral settlement in local currency. In the long term, the US dollar hegemony will certainly be challenged. As a reference, the world’s major currency was converted from the British pound to the US dollar after World War II。
With the decreasing of the international credibility of the US dollar , more and more countries using RMB as their major foreign exchange reserves and settlement currency. For example, some countries such as Saudi Arabia and Iran using RMB for oil trade. Some people believe that it passively promotes the internationalization of the RMB.
Professor YU Miaojie believes that the international demand of RMB will increase and the international status of the RMB will also rise. In other words, the value of the RMB will tend to be stronger. For China, as the country grows stronger and develops better, the influence of the RMB will also increase, and more countries and regions will use the RMB for direct transactions as well. In addition, the regionalization and internationalization of the RMB will in turn promote further high-quality development on the Chinese economy.
(Hong Kong China News Agency reporter, WANG Fengling)
Link of the news:
http://www.hkcna.hk/docDetail.jsp?id=100166557&channel=2803
This news report was reprinted and published by many Chinese media.
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