China may start yuan trading versus the Russian ruble within weeks, seeking to encourage use of its currency for global trade instead of the dollar, according to three bankers with knowledge of the matter.
The central bank sent out a document last week allowing banks to apply for ruble trading licenses and the approval process may take three weeks, according to one of the bankers, who asked not to be identified because the process isn’t public. The People’s Bank of China started yuan trading against the Malaysian ringgit between banks on Aug. 19.
Cross-border trade using China’s currency more than doubled to 48.7 billion yuan ($7.2 billion) in the second quarter from the first, the central bank said on Aug. 5. Billionaire Oleg Deripaska’s United Co. Rusal is planning Russia’s first offering of renminbi bonds in China, spurred by McDonald’s Corp.’s debut sale in the currency.
“Gradually the dollar is being eliminated from the foreign-trade settlement flows,” said Dariusz Kowalczyk, a Hong- Kong based senior economist at Credit Agricole CIB. “People are beginning to trade Asian currencies without intermediation via the dollar.”
A press officer at the People’s Bank, who refused to be named because of the agency’s rules, declined to comment.
China currently allows trading of its currency, the renminbi, versus the dollar, Hong Kong dollar, Japanese yen, the euro and ringgit on its interbank market. The Foreign Exchange Trading Center provides daily reference rates for these currencies.
Trading Partners
HSBC Bank (China) Co. and Bank of Communications Co. completed the first yuan-ringgit transactions, according to the trading center, which is affiliated with the central bank. The central bank was investigating the possibility of offering new currency pairs on the interbank market, including ruble, won and ringgit, an unnamed official at the center said in April.
China overtook Germany as Russia’s second-largest trading partner in the first six months of this year, helped by exports from Russian commodity producers including Rusal, OAO GMK Norilsk Nickel and OAO Rosneft.
Rusal, the world’s biggest aluminum producer, is preparing for a yuan bond sale, Oleg Mukhamedshin, head of capital markets, told reporters at a China investment conference in Moscow on Sept. 2. The Moscow-based company owns two smelters in China. Yuan deposits in Hong Kong have risen 65 percent this year to 103.7 billion yuan, the highest level since the Hong Kong Monetary Authority allowed yuan accounts to be set up in February 2004.