Chinese Yuan Surpasses Dollar Share in Russian Forex Market, Accounting for 48% of Total

Dollar Share Plummets from 84% to 42%
Xi Jinping's Visit to Russia Raises Interest as Potential War Variable

As Western sanctions against Russia, including those by the United States and the European Union (EU), continue for the long term, it has been reported that the share of yuan transactions in the Russian foreign exchange market has surpassed that of the dollar. As Russia becomes increasingly dependent on the Chinese economy not only for energy exports and manufacturing equipment imports but also in foreign exchange transactions, China’s influence in Russia is expected to grow stronger in the future. Attention is focused on whether there will be significant changes in the course of the Ukraine war around the time of Chinese President Xi Jinping’s visit to Russia, scheduled for April to May.

According to CNN on the 23rd (local time), data compiled by Russian financial authorities shows that from January to November last year, the share of yuan in the foreign exchange market on the Moscow Exchange reached 48%, surpassing the dollar’s 42%. At the beginning of last year, the yuan’s share was only 0.2%, but it rose sharply as Western sanctions against Russia began. Conversely, the dollar’s share, which had reached 84%, was halved.

[Image source=Reuters Yonhap News]

The sharp increase in the yuan’s share in the Russian foreign exchange market is seen as linked to the surge in China’s energy imports from Russia. According to statistics from China’s General Administration of Customs, the total trade volume between China and Russia last year reached a record high of $190 billion (approximately 247 trillion won), an increase of more than 30% compared to the previous year. In particular, China’s imports of Russian energy have noticeably increased since the outbreak of the Ukraine war.

From March to December last year, China purchased $50.6 billion worth of oil from Russia, a 45% increase compared to the same period the previous year. During the same period, coal imports increased by 54% to $10 billion, and natural gas purchases surged by 155% to $9.6 billion. As energy exports to Europe sharply declined while those to China surged, it is assessed that Russia did not suffer significant economic shocks from Western sanctions.

Russia’s major manufactured goods imports are also sourced from China. According to data from Russian market research firm Autostat, the market share of major Chinese automobile brands in Russia surged from 10% at the beginning of last year to 38%. This share is expected to rise further.

In the case of smartphones, Chinese products have completely monopolized the market. The market share of Chinese smartphone brands in Russia, which was about 40% until 2021, rose to 95% by the end of last year.

With China’s dominance increasing not only in overall exports and imports but also in the foreign exchange market, China’s influence on Russian policy is expected to grow stronger. This is why there is keen interest in whether the issue of a ceasefire in the Ukraine war will be raised ahead of President Xi Jinping’s visit to Russia scheduled between April and May.

Neil Thomas, senior analyst for China at the political consulting firm Eurasia Group, told CNN in an interview, “Xi Jinping wants to deepen the increasingly isolated relationship between Russia and China,” adding, “China will be able to exercise more leverage through Russia to obtain cheaper energy, advanced military technology, and diplomatic support for China’s international interests.”

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