Ukraine’s war has given the yuan an unexpected boost Can China’s government internationalize its currency

Over the past decade, the Chinese government has been trying to internationalize its currency, the renminbi, in hopes of weaning itself off its dependence on the dollar and making it one of the world’s leading reserve currencies, along with the dollar and euro.

In Russia, at least, the yuan has overtaken the dollar as the most traded currency, thanks to Western economic sanctions imposed after last year’s war in Ukraine. But limited by its own problems, Beijing’s efforts to internationalize the yuan are moving slowly, making it highly unlikely that the dollar’s global dominance will be shaken in the foreseeable future, international finance experts say.

The yuan surpassed the dollar in monthly trading volume for the first time in February, and the trend became more pronounced in March, according to data compiled by Bloomberg based on daily trading reports from Moscow exchanges. Before Russia launched its war of aggression in Ukraine, renminbi trading in the Russian market was negligible.

Western sanctions on Russia’s financial system have forced the Kremlin and Russian companies to shift their foreign trade payments from dollars and euros to other currencies, including the Chinese yuan.

Russia’s finance ministry also converted its market operations from dollars to yuan earlier this year and has developed a new structure for the national wealth fund to convert 60 percent of its holdings into yuan assets. The Bank of Russia regularly calls on Russian companies and citizens to move their assets into rubles or “friendly” currencies to avoid the risk of being blocked or frozen.

Beijing also provides a market for Russian goods. Al Jazeera reported that trade between Russia and China reached a record $190 billion last year, much of it in yuan and Russian rubles.

Brad Setser, a senior fellow at the Council on Foreign Relations, told VOA it is not surprising that the Chinese currency is gaining prominence in Russia amid tough Western economic sanctions against the country.

“Of course, the sanctions imposed on Russia by the United States and the European Union have had an impact.” “The United States, the European Union, Britain and Japan have frozen Russia’s foreign exchange reserves. They blocked the use of the SWIFT system, which is used to transfer money between banks, and froze the foreign assets of many of Russia’s biggest banks. With such comprehensive sanctions, it would be natural for Russia to shift its trade to other currencies to reduce its exposure to future sanction