China-Russia working on yuan-ruble trade settlement

China and Russia are also deepening their financial cooperation to combat the world financial crisis and economic recession. As part of efforts, the two countries are working to finalize their Chinese yuan-Russian ruble trade settlement scheme.

China and Russia have been pushing for fairer representation and a stronger voice for developing economies in multilateral institutions including the International Monetary Fund and the World Bank. They are concerned about the global financial system's reliance on the US dollar. During Chinese premier Wen Jiabao's visit to Russia in October 2008, the two countries agreed on a cooperation framework in the banking sector, and for using local currency to settle oil deals.

Experts say the yuan-ruble trade settlement scheme can provide a more convenient financial service for bilateral trade and for facilitating economic cooperation.

Shen Jiru, Professor of Int'l Strategy Research Institution of CASS, said, "Using local currency can facilitate bilateral trade, and boost trade volume. Financial cooperation to use local currency is good for diversifying trade-settlements. It can protect against fluctuation of the US dollar, and can transform the current structure of international reserve currency."

In December 2008, a new round of talks started in Beijing to set up a bilateral currency deal, deepening the strategic cooperation between the two countries. So far trade settled in Chinese yuan and Russian ruble has expanded in scope and depth, covering many sectors. It now accounts for 8 percent of the total trade volume.

A cluster of Chinese and Russian banks have also established their own trade settlement schemes. This has seen their local currency settlement business soar 54 times in five years to hit the equivalent of 790 million US dollars in 2008.