Moscow And Beijing Join Forces To Bypass US Dollar In Global Markets, Shift To Gold Trade

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Moscow And Beijing Join Forces To Bypass US Dollar In Global Markets, Shift To Gold Trade

An employee displays a gold bar at a gold refining workshop of the plant of Uralelektromed Joint Stock Company (JSC), the enterprise of Ural Mining and Metallurgical company (UMMC) in the town of Verkhnyaya Pyshma, outside Yekaterinburg, Oct. 17. Source: www.northcountrypublicradio.org

Originally appeared at ZeroHedge

The Russian central bank opened its first overseas office in Beijing on March 14, marking a step forward in forging a Beijing-Moscow alliance to bypass the US dollar in the global monetary system, and to phase-in a gold-backed standard of trade.

According to the South China Morning Post the new office was part of agreements made between the two neighbours “to seek stronger economic ties” since the West brought in sanctions against Russia over the Ukraine crisis and the oil-price slump hit the Russian economy.

According to Dmitry Skobelkin, the deputy governor of the Central Bank of Russia, the opening of a Beijing representative office by the Central Bank of Russia was a “very timely” move to aid specific cooperation, including bond issuance, anti-money laundering and anti-terrorism measures between China and Russia.

The new central bank office was opened at a time when Russia is preparing to issue its first federal loan bonds denominated in Chinese yuan. Officials from China’s central bank and financial regulatory commissions attended the ceremony at the Russian embassy in Beijing, which was set up in October 1959 in the heyday of Sino-Soviet relations. Financial regulators from the two countries agreed last May to issue home currency-denominated bonds in each other’s markets, a move that was widely viewed as intended to eventually test the global reserve status of the US dollar.

Speaking on future ties with Russia, Chinese Premier Li Keqiang said in mid-March that Sino-Russian trade ties were affected by falling oil prices, but he added that he saw great potential in cooperation. Vladimir Shapovalov, a senior official at the Russian central bank, said the two central banks were drafting a memorandum of understanding to solve technical issues around China’s gold imports from Russia, and that details would be released soon.

If Russia – the world’s fourth largest gold producer after China, Japan and the US – is indeed set to become a major supplier of gold to China, the probability of a scenario hinted by many over the years, namely that Beijing is preparing to eventually unroll a gold-backed currency, increases by orders of magnitude.

* * *

Meanwhile, as the Russian central bank was getting closer to China, China was responding in kind with the establishment of a clearing bank in Moscow for handling transactions in Chinese yuan. The Industrial and Commercial Bank of China (ICBC) officially started operating as a Chinese renminbi clearing bank in Russia on Wednesday this past Wednesday.

“The financial regulatory authorities of China and Russia have signed a series of major agreements, which marks a new level of financial cooperation,” Dmitry Skobelkin, the abovementioned deputy head of the Russian Central Bank, said.

“The launching of renminbi clearing services in Russia will further expand local settlement business and promote financial cooperation between the two countries,” he added according to.

Irina Rogova, a Russian financial analyst told the Russian magazine Expert that the clearing center could become a large financial hub for countries in the Eurasian Economic Union.

* * *

Bypassing the US dollar appears to be paying off: according to the Chinese State Administration of Taxation, trade turnover between China and Russia increased by 34% in January, in annual terms. Bilateral trade in January 2017 amounted to $6.55 billion. China’s exports to Russia grew 29.5% reaching $3.41 billion, while imports from Russia increased by 39.3%, to $3.14 billion. Just as many suspected, with Russian sanctions forcing Moscow to find other trading partners, chief among which China, this is precisely what has happened.

The creation of the clearing center enables the two countries to further increase bilateral trade and investment while decreasing their dependence on the US dollar. It will create a pool of yuan liquidity in Russia that enables transactions for trade and financial operations to run smoothly.

In expanding the use of national currencies for transactions, it could also potentially reduce the volatility of yuan and ruble exchange rates. The clearing center is one of a range of measures the People’s Bank of China and the Russian Central Bank have been looking at to deepen their co-operation, Sputnik reported.

One of the most significant measures under consideration is the previously reported push for joint organization of trade in gold. In recent years, China and Russia have been the world’s most active buyers of the precious metal. On a visit to China last year, the deputy head of the Russian Central Bank Sergey Shvetsov said that the two countries want to facilitate more transactions in gold between the two countries.

“We discussed the question of trade in gold. BRICS countries are large economies with large reserves of gold and an impressive volume of production and consumption of this precious metal. In China, the gold trade is conducted in Shanghai, in Russia it is in Moscow. Our idea is to create a link between the two cities in order to increase trade between the two markets,” First Deputy Governor of the Russian Central Bank Sergey Shvetsov told Russia’s TASS news agency.

In other words, China and Russia are shifting away from dollar-based trade, to commerce which will eventually be backstopped by gold, or what is gradually emerging as an Eastern gold standard, one shared between Russia and China, and which may day backstop their respective currencies.

Meanwhile, the price of gold continues to reflect none of these potentially tectonic strategic shifts, just as China – which has been the biggest accumulator of gold in recent years – likes it.

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  • pao

    This will be how the East destroys the West.

    • Solomon Krupacek

      but.
      russia.
      is.
      part of west.

      (chinese viewpoint)

      • pao

        …perhaps less so than the US.

        • Solomon Krupacek

          america is far, russia is in neighborhood.china never forgott the lost territories in favor of russian empire in the 9th century. they want back it. already now several milions of chinese infiltrated this area. china is the oldest country in the world. they do not think in yiears, but in centuries. they have time. 2-3 generations will push there chinese, inbetween in russia isdeceasing the number of russians (islamic people are growing). so, they only wait and will come the day D, when can took that kand without fireshoot.

          • Gary Sellars

            Total BS… 9th century? Get the fuck outta here…

            Russophobe clowns, where do these idiots come from?

          • Solomon Krupacek

            19th. mistype.
            in 9th century there was no moscovian russia :) only kievian russia in east europe.

          • Paul Lynch

            I don’t think anyone today is worried about 9th century borders……

          • Solomon Krupacek

            19th century. amd in 60tieschina tried to take back.

  • Russell A Wilson

    This is what all the russophobia in the US is all about. The US will eventually attack Russia as they will stop at nothing to protect the dollar.

    • pao

      If the US is foolish enough to attack Russia I think that would crash the dollar even faster. War with Russia would be extremely expensive (that’s a lot of paper money!) Also, would not doubt China supporting Russia in such a conflict. Lybia was starting to back their currency with gold and thus was destroyed…Russia and China are much stronger.

      • itibi ra

        If US attacks Russia, it will quickly escalate to WWIII and there will be no such thing as currencies anymore as it will be the end of civilization as we know it.

        • pao

          True, let’s hope it never comes to all out war. I guess an all out Cold War or continuing boarder conflicts through proxies is more what I was thinking. The US economy withstood the first Cold War, it would not survive another with its trillions in debt. Russia is much stronger in this regard.

    • Peter Moy

      I disagree with you. Even the incompetent directors in the Pentagon of today’s wars (Afghanistan, Iraq, Syria, Libya, drone attacks in Yemen, Pakistan, Somalia) would not be foolish enough to risk war with Russia or China. The difference is that these two countries are heavily armed with a plethora of modern weapons and WILL fight back. They both have strong armies, air forces and navies. This is a big difference compared to all of America’s enemies since World War II. The US military is already overstretched and doesn’t have enough personnel and equipment. Conscription to fight another war to benefit only a few (defense contractors and bankers)? It will never happen. Even the weakling countries in NATO would be wise enough not to join another mobbing attack (i.e. coalition) against Russia or China.

      • Russell A Wilson

        sorry to disagree but the US powers to be are that incompetent and foolish enough to try. Look how they are butting in for the battle for Raqqah as if they will not have to deal with Syrian and Russian forces.

  • Arthur Smith

    “Russian” Central Bank does nothing but chokes russian economy and eliminates obstacles for draining capital out of Russia. There is nothing russian about that establishment, it’s full of traitors and saboteurs. The only way for this stuff with China to be genuine is under big pressure from both chinese and presidential administration, otherwise it’s just another corruption scheme or it’s all simulation and won’t work properly until Central Bank and Financial Ministry are purged. Chinese government is already very displeased at sabotage of deals we had, Russia loses what little reputation it restored after breaking up with China and disbanding the USSR.

    Oh, and the improvement of trade is probably due to the correction of ruble’s value.

    • Gary Sellars

      Mindless blather…. blah blah corruption… blah blah traitors… bah blah Russian incompetance…

  • Fritz Otto

    If Russia and China are establishing any trade in Gold-values the intentional target, to disengage from the US-influences risks not really to be reached.
    Insider of money-theory knows, that in fact only any exchange-definitions would be enough to realize and assume good trade-relations. It seems, that there are partners in the game who seems not to be able to understand this Problem! – If China and Russia are exchanging in great stile goods and services just the exchange-rates of such big deals would be completely fullfilling all the needs of any exchange-rate.
    And if they would do so, both would have the option to create in the same matter a new currency what every other country could join in the same or similar way.
    But to go back to any old Gold-Standard is some ot the most impossible to think in this kind.
    see also: http://www.sffo.de

  • chris chuba

    For a laugh, this is from my ‘delusional Russian analysis by Neocons’ folder http://info.geopoliticalfutures.com/the-myth-of-putin-infograph?utm_campaign=The%20Myth%20of%20Putin%20Infographic&utm_content=51507291&utm_medium=social&utm_source=facebook

    My favorite one that is relevant to this article is how he has Russia going bankrupt by the end of 2017 because their $30B of ‘reserves’ will be depleted. Russia has accumulated at least $60B of gold alone and has $400B of foreign currency exchange reserves. ‘Professing themselves wise, they became fools’ Rom. 1:22.

    • Jacek Wolski

      Only fools quote verses from the bible.