The central banks of China and Russia have signed a 3-year ruble-yuan currency swap deal up to $25 billion, in order to boost trade using national currencies and lessen dependence on the dollar and euro.
On Monday, China’s Central Bank announced the 150 billion yuan (815 billion ruble) currency swap between the Russian ruble and Chinese yuan. In terms of the Chinese currency that is $24.5 billion, and in Russian rubles, $20.1 billion.
“We need to expand the practice of using national currencies in trade. Currently they only account for 7 percent of turnover,” Prime Minister Dmitry Medvedev said at the 18th annual Russian-Chinese Commission, also attended by Chinese Premier Li Keqiang.
The deal is valid for 3 years, and can be extended if both Russia and China agree. The draft currency swap was settled in August, but details on the size of the deal were sketchy.
Using more local currencies will speed up trade between the two countries who are aiming to reach $100 billion by 2015. Trade between Russia and China is already nearly $90 billion and is scheduled to hit $200 billion in the next six years.
Cooperation between Russian and Chinese banks is also on the rise, and China’s Import Export Bank, which is 100% state owned, has pledged to help Russian banks now cut off from Western capital markets, due to the latest round of sanctions.
The Export-Import Bank (Exim) has agreed to establish a credit line equivalent to $2 billion for Russian state bank VTB, and has also signed agreements with VEB (Vnesheconombank), and the Russian Agricultural Bank.
The credit lines can be used to finance imports from China, from agriculture to high tech equipment.
Medvedev and Li signed over 40 other agreements at the meeting, including outlining plans to add another pipeline from Russia to China. Li is in Moscow for a three-day visit.