China and Russia shift from traditional banking to digital payments for trade, driven by sanctions and the desire to reduce reliance on the US dollar.
Points
- Sanctions on Russia prompt a move to digital payments.
- Qifa, a digital platform, becomes crucial for China-Russia trade.
- Digital payments reduce dependency on traditional banking systems.
- Move away from the US dollar aligns with BRICS countries’ goals.
- 90% of trade between Russia and China now uses local currencies.
China and Russia are increasingly adopting digital payments for their trade dealings, moving away from traditional banking systems. This shift is largely driven by sanctions on Russia, which have made conventional banking processes cumbersome, with some transactions taking months to clear. To circumvent these issues, both countries are turning to quicker and more efficient digital alternatives.
Qifa, a digital platform operating in Beijing and Moscow, has become a key player in facilitating these transactions. With fewer Chinese banks willing to risk sanctions, digital methods are becoming increasingly vital. This shift is part of a broader strategy by BRICS countries to reduce their reliance on the US dollar.
The embrace of digital payments is not only about speed and efficiency but also about a strategic move away from the dollar’s dominance. BRICS nations have faced challenges due to the dollar’s fluctuating value and the economic influence of the United States. For instance, Brazil has experienced economic volatility linked to dollar changes, while India’s stock
market has been impacted by US investors withdrawing funds. Russia and China, in particular, have faced significant difficulties due to US sanctions, prompting them to seek alternatives.
Russia has been actively exploring digital payment options for several years. The country has allowed the use of stablecoins like USDT for international payments, and discussions in the Russian parliament are ongoing about legalizing all cryptocurrencies for foreign trade. This approach could help Russia and its partners avoid using the dollar altogether.
Last year, over half of Chinese payments in trade with Russia were settled in RMB, the local currency. Only 42.8% were done in US dollars, signaling a clear shift away from the dollar. BRICS countries are also working on a new system called BRICS Bridge, designed to link their financial systems using digital currencies from their central banks.
Recently, Russian President Vladimir Putin stated that 90% of trade between Russia and China now uses their local currencies, rubles, and yuan. This move is expected to be a key topic at the upcoming BRICS summit in Russia in October 2024, where leaders will strategize on de-dollarization.
解説
- Sanctions: Penalties imposed by one country on another, often in the form of trade restrictions or financial barriers, to influence political or economic behavior.
- BRICS: An association of five major emerging economies: Brazil, Russia, India, China, and South Africa, aiming to enhance economic cooperation and political coordination.
- De-dollarization: The process of reducing reliance on the US dollar in international trade and finance, often to avoid the economic influence and sanctions imposed by the United States.
China and Russia’s shift to digital payments for trade marks a significant step in their efforts to reduce reliance on the US dollar. This strategy aligns with the broader goals of the BRICS nations to create a more balanced and independent global financial system. As digital payment platforms become more integrated into their trade practices, these countries are paving the way for a new era of economic cooperation and financial innovation.