Opportunity or threat

Issuance of yuan-denominated securities also can lead to further development of market instruments that allow the majority of trade and investment between China, Russia and other emerging markets to be carried out in local currencies. This would circumvent the need for foreign exchange transactions as transactions are usually conducted in dollars.

Opportunity or threat

Russia follows the example of Britain, which last year became the first Western country to issue yuan-denominated debt. China is preparing to issue its own sovereign debt market in London.

“In London, the yuan is seen as a possibility, but in New York see it as a threat,” said John Volemer, director of the company forex R5FX. “The best thing that happened for Chinese money markets recently was the decision by Washington to not do business with Russia,” he added.

Several Russian banks have issued yuan-denominated bonds in Hong Kong in recent years. The forthcoming issue, however, will be the first government securities, and the first such market in Moscow. Russian companies have issued debt in yuan can expect higher interest rates than dollar-denominated securities. However Shulakov said that even with the lifting of Western sanctions Russia needs new funding opportunities. “Memories fade quickly for investors, but not for borrowers. Today they can be penalized for one reason, tomorrow – on the other. There is a need access to capital in a place where you can control the game,” he says.