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In December, the International Monetary Fund (IMF) decided to make the yuan a reserve currency from October 1, 2016. This is an important development for Russia, as it will help reduce the share of the dollar in the country’s foreign exchange reserves.
Since China has a share of around 13 percent in Russia’s overall foreign trade, the share of the yuan in Russia's foreign exchange reserves will also be around 13 percent, and can grow with increased trade.
After the yuan becomes a reserve currency, the BRICS Currency Fund will improve its role as provider of assistance to member countries using reserve currencies.
Furthermore, the yuan's higher status will provide a better position for the Asian Infrastructure Investment Bank (AIIB), which is already considered a competitor for the IMF and the World Bank.
AIIB consists of 57 members and its funds total $100 billion. Russia is an active participant in this structure and expects to take out loans in yuan and other national currencies.
Trade settlements in dollars will diminish in the CIS countries, stimulating the use of national currencies in foreign transactions and increasing the liquidity of national currency markets.
Consequently, the evolution of national currency markets will improve thanks to a coordinated monetary policy, resulting in the activation of economic cooperation and the strengthening of integration processes in the post-Soviet countries.
The large-scale introduction of the yuan in Russian-Chinese trade can also accelerate the development of Russia's Far East, and the construction of large pipelines for transporting oil and gas to the East.
The writer is a professor of banking and finance at the Russian Presidential Academy of National Economy and Public Administration (RANEPA).
