Global Development Perspective
Policy Brief No. 15.002
January 08, 2015
China won't suffer from yuan-rouble swap
Xu Qiyuan
Did China give money away in the recent yuan-rouble swap? To answer this question, we should first understand that this deal was different from the traditional currency swaps that aim to address liquidity needs in the short term. In 2013, China's direct investment in Russia exceeded US$1 billion, 4,500 times the amount of Russia's investment in China.
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This is only partially similar to the current situation in Russia. The fall in the rouble was caused by the outflow of dollars, but unless Beijing were to provide Moscow with dollars, the swap wouldn't give Russia any help in the foreign exchange market. Giving yuan to Russia is as useless as giving anti-diarrheal pills to a man with cold.
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However, with the rouble falling sharply and Russia's interest rate rising substantially, one may wonder whether Russia will activate the deal if local companies change their choice of currency in trade settlements.
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