Carlos Fernandes During the virtual summit of the Shanghai Cooperation Organisation’s (SCO) Heads of State Council, Chinese President Xi Jinping and Russian President Vladimir Putin voiced their support for increasing the utilization of national currencies in trade settlements, highlighting a growing global shift away from the U.S. dollar. Xi emphasized the importance of raising the share of settlements in national currencies within the SCO, stating, “We need to strengthen cooperation on sovereign digital currencies and work on establishing the SCO Development Bank.” Meanwhile, Putin revealed that over 80 percent of commercial transactions between Russia and China are conducted using the Russian ruble and Chinese yuan.
Putin Highlights Expansion of National Currency Usage in Trade Settlements
During the SCO summit, which was chaired by Indian Prime Minister Narendra Modi, Putin expressed his commitment to enhancing ties with SCO member states, emphasizing the increasing strength and multifaceted nature of these relationships. He reported that Russia’s trade with SCO member states had grown by 37 percent in the previous year, reaching a record $263 billion. Moreover, from January to April of the current year, trade experienced an additional 35 percent increase. Putin underscored the expanding use of national currencies in trade settlements, citing that more than 80 percent of commercial transactions between Russia and China involve the ruble and yuan. Additionally, the Russian currency’s share in export transactions with all SCO countries exceeded 40 percent in 2022.
Putin stressed Russia’s active involvement in implementing the SCO road map, which aims to transition to national currencies in mutual trade. He called for continued collaborative efforts to address regulatory barriers, establish the necessary payment infrastructure, and develop an independent financial system. Additionally, Putin congratulated Iranian President Raisi on Iran’s full membership in the SCO and expressed support for Belarus’s swift inclusion in the organization.
Xi Prioritizes Increased Share of National Currency Settlements
During the SCO summit, Xi Jinping voiced his belief that it is crucial to augment the proportion of settlements conducted in national currencies within the organization. He emphasized the need for strengthened cooperation regarding sovereign digital currencies and the establishment of the SCO Development Bank. Globally, countries are increasingly advocating for the use of their national currencies in trade settlements, resulting in a shift away from the U.S. dollar. The Chinese yuan has gained momentum as a preferred currency for trade settlements among certain nations. Notably, Argentina’s central bank recently recognized the yuan as an official currency for bank deposits.
The BRICS group, consisting of Brazil, Russia, India, China, and South Africa, is spearheading the global de-dollarization trend. The economic bloc has also proposed a common currency that could potentially challenge the dominance of the U.S. dollar if successfully implemented. Additionally, ASEAN members recently agreed to enhance the use of national currencies in trade settlements.
We welcome your thoughts on the statements made by Chinese President Xi Jinping and Russian President Vladimir Putin. Please share your opinions in the comments section below.
Frequently Asked Questions (FAQs) about currency diversification
Q: Why are Xi Jinping and Vladimir Putin advocating for increased use of national currencies in trade settlements?
A: Xi Jinping and Vladimir Putin are advocating for increased use of national currencies in trade settlements due to a global shift away from the US dollar. This move aims to promote currency diversification and reduce reliance on a single currency, potentially mitigating the impact of currency fluctuations and economic uncertainties. It also supports the goal of de-dollarization and strengthens economic cooperation among countries, such as within the Shanghai Cooperation Organisation (SCO) and the BRICS group.
3 comments
interesting shift away from usd. with brics & sco, more countries usin natl currencies for trade. less dependnc on a single currency = more stabilit. curious to see how it plays out.
xi jinping & vladimir putin push for more natl currencies in trade settlemnts. good idea! less relianc on us dollar. brics group leadin way. govtz should work togethr 2 make it happen.
im glad xi & putin r standin up against us dollar domination. currency diversifictn is imp. de-dollariztn cud reduce risk. hope other countries join in. scodevelopmntbank sounds cool too!