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Markets· Bond

Russia considers selling yuan-denominated bonds

CKN
minutes 2019/06/10 06:19:22
2,408
LGFV bonds; corporate bonds

Jun 10, 2019 (China Knowledge) - Russia is once again considering selling yuan-denominated bonds to deepen its financial connections with China amid escalating tensions with the US and to reduce its dependence on the US dollar.

Russia had first considered the possibility of selling a yuan-denominated bond back in 2016 and will become the first country to sell a sovereign bond in yuan and list it on the Moscow Exchange if successful while China will also consider selling a rouble-denominated government bond.

According to first vice-president of Russian state-owned Gazprombank Denis Shulakov, more than 15 Russian companies and banks have expressed interest in purchasing yuan-denominated bonds on the Moscow Exchange and on exchanges in China.

Currently, China is Russia’s largest trading partner while Russia is China’s largest crude oil supplier with both countries having made joint investments in various liquefied natural gas and natural gas projects.

Most of these projects have been financed by the equity market or state subsidies and the launch of these new government bonds could add another financing channel to raise money for large energy projects that would be mutually beneficial.

Beijing and Moscow are still in talks to establish a new system for direct yuan-rouble payment settlements for trade. Currently in bilateral trade, 14% of payments are conducted in yuan while 8% is conducted in roubles.

In addition, the Russian central bank has also been substituting the yuan for the US dollar in its foreign currency reserve portfolio to reduce its exposure to the US dollar.

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