The trading volume of the Chinese yuan on the Moscow Exchange exceeded that of the U.S. dollar in 2023 amid Western sanctions on Russia’s financial system.
According to data from the Moscow Exchange, the yuan constituted nearly 42 percent of the total foreign currency traded, reaching a volume of 34.15 trillion roubles or $391.5 billion in 2023. This figure represents a threefold increase compared to the previous year.
Meanwhile, the dollar's share stood at 39.5 percent, amounting to 32.49 trillion roubles. It marks a notable decrease from 49.90 trillion roubles in 2022, declining more than 63 percent. As a comparison, yuan trading held a 13 percent share in 2022.
While European and U.S. brands exit the Russian market due to geopolitical tensions over Ukraine, Russia is actively pursuing alternative avenues for trade. Moscow has intensified energy supplies to China and expanded its purchases of Chinese goods, ranging from cars to smartphones.
In return, China's use of the Yuan for purchasing Russian commodities has surged. Chinese customs data reveal a record two-way trade of $240 billion in 2023, marking a 26.3 percent increase from the previous year.
This development is indicative of Moscow's increasing reliance on Beijing and the deepening partnership between the two nations. It bears significant implications for China's rising influence and the growing prominence of its currency on the international stage.
Turning point in global finance
China's escalating economic influence and its standing as the world's second-largest economy have contributed to growing confidence in the yuan. In the past decade, China has actively pursued a series of measures aimed at enhancing the global standing of its currency.
These initiatives include the expansion of the offshore yuan market, the encouragement of yuan usage in international settlements and the establishment of currency swap agreements with numerous nations.
In Moscow, the growing prominence of the yuan is due to various factors, primarily the robust economic ties between China and Russia. Both nations have actively advocated for trade in their own currencies, aiming to mitigate exposure to the fluctuations and uncertainties linked to the U.S. dollar. In addition, increased collaboration in energy, infrastructure and technology has also facilitated the wider adoption of the yuan in bilateral transactions.
The significance of the yuan's rise in Moscow also extends beyond economic implications, symbolizing a gradual erosion of the U.S. dollar's dominance in the international monetary system. For years, the U.S. dollar has served as the de facto global reserve currency, facilitating global trade, investment and financial transactions.
The emergence of the yuan as Moscow's most traded currency could potentially prompt other nations to reconsider their reliance on the US dollar. It may encourage a broader diversification of currency reserves, leading to an expanded spectrum of currencies utilized in international transactions.
Such a trend could have far-reaching consequences for the global financial system, altering the dynamics of international trade and challenging the traditional dominance of established currencies.
Although the U.S. dollar still maintains its position as the world's dominant reserve currency, the yuan's rise in Moscow underscored a transformative period in global finance.