The sudden spike of the Yuan against the Ruble is imposing pressure on Russia when dealing with China, its most important trading partner.
According to Chinese customs data, the total trade between Russia and China increased 35.9% last year to a record high of $146.9 billion.
Since international sanctions were imposed on Russia due to its invasion of Ukraine, most financial brokers have also widened their bid-ask spread and increased margin requirements for investors when trading Ruble/Yuan, highlighting the uncertainty of Ruble value.
Both countries started using their currencies in bilateral trade in 2010. In the first half of 2021, 28% of Chinese exports to Russia were settled by Yuan.
According to Bloomberg, the Yuan reached a record high against the Ruble this week, rising 25% on Tuesday alone.
With the increase of the Yuan, it would be more costly for Russia to import goods from the world’s largest exporter. Meanwhile, exporting oils and other energies will also become a challenge for Russia.
Another burden is the limit of Chinese currency in Russia’s central bank reserves, which was 13.1% in June 2021, according to the foreign exchange and gold asset management report issued by the Bank of Russia. This amount is unlikely to last long, especially when the Ruble depreciates significantly versus the Yuan.