Russia Holds Large Amounts of Chinese Bonds and Yuan... Used as an Escape Route from International Sanctions?

Russian President Putin presiding over an economic meeting via video conference. [Image source=Yonhap News]

[Asia Economy Reporter Song Seung-seop] It has been identified that Russia holds a large amount of Chinese yuan assets. Amid concerns of foreign currency shortages due to international sanctions, attention is focused on whether the yuan will serve as an escape route from the liquidity crisis.

According to Bloomberg on the 2nd, Australia and New Zealand Banking Group (ANZ Bank) estimated that the Russian central bank and sovereign wealth fund may hold Chinese bonds worth a total of $140 billion (169 trillion won). It also estimated that the Russian central bank and Russia’s sovereign wealth fund (NWF) may each hold yuan-denominated bonds worth $80 billion (97 trillion won) and $60 billion (72 trillion won), respectively. This amounts to 25% of the yuan bonds held by foreigners in China.

ANZ Bank analyzed that amid comprehensive international financial sanctions, Chinese bonds and the yuan are virtually the only foreign currencies available. It also forecasted that Russia might use China’s independently established payment system, the Cross-Border Interbank Payment System (CIPS). Since the Chinese central bank has already signed a currency swap agreement worth billions of dollars with Russia, financial support from the Chinese government to Russia appears possible.

However, there are also analyses that the immediate effect may not be significant. The Wall Street Journal (WSJ) predicted that although China is expanding its imports of Russian energy, it will take years to see actual effects. China is actively purchasing Russian crude oil and natural gas, but crude oil supply is based on a 10-year long-term contract from the start, and natural gas requires new pipelines, making short-term effects difficult.

The same applies to China’s easing of restrictions on Russian wheat imports, which was announced just hours after Russia’s invasion of Ukraine. Since China’s imports of Russian wheat are very small, the effectiveness is expected to be limited. Even if imports are increased, it is known that resolving logistics issues will require considerable time.

This content was produced with the assistance of AI translation services.