Russian companies are struggling with a yuan deficit

Russia’s transition to a “friendly” yuan in foreign trade turned into problems. Importing companies show a strong demand for the Chinese currency, but exporters and the Ministry of Finance are unable to meet it.

This is evidenced by the high rates of one-day yuan swaps – contracts under which the parties undertake to carry out two transactions: first to buy the currency and then to sell it. For the third day, rates exceed 6% per annum, and have increased by more than 120 basis points since the beginning of May, writes Kommersant, citing data from the Moscow Stock Exchange.

The last time such high exchange rates were two months ago, which indicates an increase in the deficit of the Chinese currency on the Russian market. At the same time, the daily volume of swap transactions with the yuan on the Moscow Exchange is 250-300 billion rubles. – almost twice as much as the volume of the same operations with the dollar and the euro.

According to the Central Bank, in the 12 months since March last year, Russian exporters increased the volume of monthly transactions in Chinese yuan from $0.5 billion to $6.9 billion. At the same time, importers’ demand for foreign currency increased 5.5 times, to USD 7.7 billion.

According to the China General Customs Office, in the first quarter of 2023, imports from Russia increased by a third year-on-year to USD 29.8 billion, while exports from Russia increased almost 1.5 times to USD 24.1 billion.

In the current situation, there is no source of liquidity in the new yuan, unless the Ministry of Finance and the Central Bank increase the sale of foreign currency from the National Wealth Fund, says Yuri Tulinov, senior vice president of the market research and strategy office at Rosbank.

However, government sales of the yuan fell steadily for the third month in a row. Since May 10, the Central Bank, in the interests of the Ministry of Finance, has reduced the sale of the yuan by almost half to 2 billion rubles. daily, although in March it offered currencies worth 5.4 billion rubles.

The yuan deficit could widen in the second half of the year as Russian banks no longer have much liquid yuan assets, Tulinov said. According to him, nostro account balances in non-resident banks are at a very modest $10 billion. They have fallen by $20 billion since last fall.

“So, Russian banks will constantly struggle with yuan deficits until the balance of export-import flows in foreign currency stabilizes,” Tulinov concluded.

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