Russia will start to purchase Chinese yuan for its international reserves as soon as this month, according to reports from Russian economists. While analysts state that the purchases will be small and symbolic in the beginning, these will supposedly demonstrate a turnaround in the economy of the country.
Russia to Purchase Chinese Yuan for Reserves
Russia will start purchasing Chinese yuan for the first time since the invasion of Ukraine, according to reports from local economists. The move marks a departure from the sell-off that the Russian Federation began executing at the start of 2023, cutting its numbers since February.
The purchase of these funds in Chinese yuan will help the country to keep piling up on its reserves, which had been cut by the seizures of more than $300 billion in assets due to Western sanctions enacted as a consequence of the start of the Russia-Ukraine conflict. About these purchases, Bloomberg economist Alexander Isakov stated:
The volumes of FX purchases will be small initially, but highly symbolic as they will show that the country instead of eating through reserves is building them.
However, other economists believe that the yuan purchases will start in June, like Dmitry Polevoy, an economist at Locko-Invest in Moscow, who also stated the buys will be very small at the start. This is seen as positive by some analysts, as it is seen as a good signal for the stabilization of the Russian economy.
Natalia Milchakova, an analyst at Freedom Holding Corp., stated:
It will be important for the market that the state is starting to accumulate reserves again instead of spending them. This may even positively affect the ruble.
Building Sanction-Free Reserves
The report comes after the governor of the Bank of Russia, Elvira Nabiullina, announced on April 21 that the bank had focused on building a bank reserve comprised of non-sanctioned assets, but without specifying the nature of these assets. While the sanctions have affected some of its trading structure, Russia has survived and even thrived under these restrictions, managing to build a stash of $80 billion in reserves held abroad, according to March reports.
This is, in part, thanks to the collaboration of allies like China and India, also members of the BRICS bloc, that have absorbed the oil production of Russia. There are also reports that suggest some of these countries are acting as proxies for Russian oil companies, buying large quantities of this sanctioned oil and ‘laundering‘ it — shipping it to countries that have cracked down on Russian oil imports.
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