Financial experts in the West expect that the US punitive response to Russia’s invasion of Ukraine will contribute to China’s efforts to internationalize the yuan.
Sanctions imposed by the United States and other Western countries against Russia have led to the fall of the ruble and have had a devastating effect on the country’s financial system.
However, the yuan remained markedly stable despite China’s close ties with Russia, and there was talk that the currency could soon become an international safe asset after the COVID-19 pandemic.
The yuan recently overtook the Japanese yen in the ranking of international payments Swift after rising to fourth position, while observers also note that Russia’s partial exclusion from Swift may push more countries concerned about US influence to switch to cross-border interbank cross-border system. (CIPS).
China’s official Xinhua news agency recently highlighted the possibility that Russian financial institutions excluded from Swift will choose instead to participate in CIPS, which has about 1,200 member institutions in 100 countries, compared to about 11,000 strong Swift members.
This was stated by Professor of International Political Economy at the University of California, Santa Barbra Benjamin Cohen Financial Times said there was “no doubt” that sanctions against Russia would create an impetus for more countries to join the Chinese-led payment system.
“Every time the United States and its allies gain access to the dollar with weapons, it creates an additional incentive for the Chinese to reap the benefits at some point,” Cohen said.
“This is not the case of the Chinese wolf in the door, it is rather the case of termites in wooden products.”
Eswar Prasad, a former head of China’s IMF division and an expert on the yuan’s internationalization, agrees with Cohen, pointing out that sanctions are encouraging many countries to look for alternatives to the US dollar for foreign trade.
“The events of the last few days will give spirit to those countries and institutions that want to bypass the international financial system based on dollars,” Prasad said.
https://www.chinabankingnews.com/2022/03/09/western-experts-see-ukraine-conflict-driving-internationalisation-of-the-renminbi/ Western experts see conflict in Ukraine stimulates yuan internationalization