China and Russia pledge to step up efforts to build independent trade network to reduce reliance on US-led financial system

• Presidents Xi Jinping and Vladimir Putin agree to accelerate attempts to create a system that cannot be influenced by ‘third parties’
• The two leaders also want to increase the number of deals settled in their own currencies as sanctions threaten to limit US dollar transactions

China and Russia have pledged to speed up their efforts to set up an independent trade network to reduce their reliance on the US-led international financial system.

Wednesday’s video call between Chinese President Xi Jinping and his Russian counterpart Vladimir Putin, saw “special attention paid to the necessity of accelerating efforts on the formation of independent financial infrastructure for servicing trading operations between Russia and China”, Russian presidential aide Yury Ushakov told Tass news agency.

He added that “third countries” would not be able to influence this network.

The two leaders also welcomed an increase in the number of deals settled in yuan and roubles as well as efforts to improve access to stock markets for investors from both countries, Ushakov said.

In Wednesday’s call, Xi said trade between China and Russia in the first three quarters of the year had already topped US$100 billion for the first time.

The yuan accounted for more than 17 per cent of bilateral trade settlements between the two and more than 12 per cent of Russia’s international reserves in 2020, according to Chinese Communist Party mouthpiece People’s Daily.

Both China and Russia are planning to reduce their reliance on the US-led financial system in the face of sanctions from Washington, which might curb US dollar transactions or limit their access to international payments mechanisms such as SWIFT.

Bank of Russia governor Elvira Nabiullina told a parliamentary session two years ago that the de-dollarisation policy was needed to “mitigate Russia’s external risks of both an economic and political nature”.

Last year Fang Xinghai, vice-chairman of the China Securities Regulatory Commission, also told a Caixin forum in Beijing that internationalisation of the yuan could help offset constraints on major projects such as the Belt and Road Initiative caused by reliance on foreign currency.

The dialogue between the Chinese and Russian leaders came a week after Putin and US President Joe Biden held a video summit aimed at defusing the crisis over Ukraine sparked by a massive Russian troop build-up on the border.

Washington has said Russia may be making preparations for an invasion of Ukraine as soon as next month, which Moscow denied.

Xi told Putin that China would always support Russia’s efforts to maintain the nation’s long-term stability, while Putin backed Beijing’s approach to Taiwan, which Beijing views as a breakaway province.

Xi also said the two nations should further promote energy cooperation and development of renewable energy.

Building an independent financial infrastructure would allow the two countries to avoid fluctuations in trade indicators and focus on “qualitative growth”, Xiong Leping, a lecturer at the school of Russian in Beijing Foreign Studies University, said.

“At present, Russia’s international trade, and I should say any country’s international trade, is temporarily unable to avoid the US financial system, but the desire of countries to leave the US hegemonic financial system has grown stronger in recent decades under the influence of multiple factors. “he said.

In November, Beijing and Moscow discussed long-term contracts to jointly develop coal deposits in Russia.

In the first 10 months of this year, Russia exported more than 12 billion cubic metres of natural gas to China along the Power of Siberia gas pipeline – launched in 2019. That is nearly triple the 4.1 billion cubic metres of natural gas Russia exported to China for all of 2020.

Russian energy exporter Inter RAO said earlier that it had almost doubled electricity supply to China – to 555 million kilowatt-hours per month – from November at the request of the Chinese government.

Authors: Teddy Ng, Ben Zhao, SCMP