Home Money China Rolls Out Yuan-Ruble Payment System in Yet Another Blow to the Dollar

China Rolls Out Yuan-Ruble Payment System in Yet Another Blow to the Dollar

by Thomas Ressler

China has instituted a payment versus payment (PVP) system for Chinese yuan and Russian ruble transactions in an effort to lower risks and enhance the efficiency of its foreign exchange transactions, Reuters reported out of Shanghai on Thursday. A PVP system enables transactions to be settled in two different currencies at the same time.

The development represents the first time a PVP system has been set up to facilitate trading the yuan and the ruble, the news agency said, citing a statement on the website of the China Foreign Exchange Trade System (CFETS). CFETS intends to establish PVP systems for yuan transactions with other currencies, according to Reuters.

ZeroHedge reported that the launch of the PVP system will help enable China and Russia to “further increase bilateral trade and investment while decreasing their dependence on the US dollar.” Analysts at Global Research said the new mechanism “could rival the long-held monopoly of the US SWIFT inter-bank payment system.” Also, some on Wall Street will “view this move as an act of aggression in challenging the pre-eminence of the US dollar as the planet’s global reserve currency – which is inextricably tied and nearly completely dependent on the US ‘petrodollar’ to prop up the value of the US fiat currency,” they added.

The analysts do not expect the American government and its Western allies to take this development, which they characterized as a “major financial challenge,” lying down. “Washington may use its North Korea, Myanmar or Philippines cards as a means to increase its leverage in Asia, in an effort to extract Chinese concessions, and head-off China’s new financial ascendancy,” they said.

Earlier this month, China indicated it was poised to roll out a gold-backed, yuan-denominated oil futures contract, which would help facilitate transactions outside the influence of the US greenback.

You may also like