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China-Russia relations
EconomyChina Economy

China welcomes bigger role for yuan in de-dollarised Russian sovereign wealth fund

  • Moscow’s move reflects confidence in Chinese economic development, foreign ministry says
  • Drive to shed US currency comes as both countries come under American sanctions pressure

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Russia’s Finance Ministry says the yuan accounts for 30.4 per cent of the National Wellbeing Fund’s holdings. Photo: AFP
Karen Yeung
China has welcomed Russia’s efforts to give the yuan a bigger role in its sovereign wealth fund, saying it reflected Russia’s confidence in China’s economic development and the prospects for cooperation between the two countries.

Chinese foreign ministry spokesman Wang Wenbin said on Friday that China would continue to deepen mutually beneficial cooperation with Russia, firmly support each other in international and regional affairs, and safeguard the common interests of the two countries.

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The support came after Russia’s US$186 billion sovereign wealth fund said last week that it had completed a plan to cut its US dollar holdings to zero and boost holdings denominated in yuan and euros as part of efforts to reduce its vulnerability to US sanctions.

Russia’s Finance Ministry said that as of July 5 the yuan accounted for 30.4 per cent of the National Wealth Fund’s holdings, while almost 39.7 per cent was in euros. It also cut the share of British pounds to 5 per cent and raised the amount in gold to 20.2 per cent.

Finance Minister Anton Siluanov last month announced plans to sell the remaining US$40 billion in US dollar assets from the fund’s portfolio. The decision is in line with actions by the Bank of Russia, the central bank, which has dumped dollar-denominated reserves in favour of gold.

Countries like Russia and China are shedding their dollar assets as their officials and institutions face US financial sanctions for not complying with US foreign policy.

The dollar’s dominance in the global financial system gives US regulators enforcement power to track and control money flows in and out of US banks, granting them unique capacity to impose sanctions to restrict activities of criminals.

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Last week, Russian President Vladimir Putin reportedly unveiled a new national security policy that aims to balance its ties with China and India while cutting its dependence on US dollar-based transactions in Russia’s foreign trade.

Amid mounting foreign sanctions and pressure in recent years, the dollar’s share of the Russian central bank’s international assets had fallen to as low as 20 per cent compared to around 60 per cent of Russian exports, 40 per cent of Russian imports, 60 per cent of Russian foreign debt and 45-65 per cent of Russian international private assets, according to ING Bank.

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