Why China Is Teaming Up With Russia To ‘De-Dollarize’

What happened: Back in January, the Economist noted that the Trump administration’s “aggressive use of sanctions endangers the dollar’s reign.” And now, the Nikkei Asian Review reports that China and Russia are teaming up to ease their dependency on the American dollar. Experts highlight how this occurrence could lead to a “financial alliance” between the two superpowers.

Data from Russia’s Central Bank and Federal Customs Service shows that during the first quarter of 2020, the dollar’s share in Sino-Russian trade transactions fell below 50 percent for the first time on record. The US dollar accounted for 46 percent of settlements between the two powers, euro currency soared to an all-time high usage of 30 percent, and the national currencies of Russia and China accounted for 24 percent of transactions.

Jing Take: The “de-dollarization” of China and Russia’s financial systems will encourage bilateral trade with their respective national currencies, helping both countries avoid weaknesses linked to the American dollar. In a time when both the federal government and US corporations “have embarked in a rapid-fire experiment in borrowing without precedent,” this de-dollarization will help Russia and China offset any possible risks associated with rising American debt and deficit. Furthermore, it will help the two countries sidestep President Trump’s sanctions and tariffs. Yet, ultimately, this alliance is notable because it could erode trust in the US dollar’s stability, which has been considered the ultimate reserve currency.

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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