Major Russian banks are sounding the alarm on a yuan liquidity deficit, prompting the rouble to plummet against the Chinese currency and sending yuan swap rates soaring.
The rouble saw a nearly 5% drop against the yuan on Sept. 4 on the Moscow Stock Exchange, following the finance ministry’s announcement that daily yuan sales by the central bank would be significantly reduced in the coming month.
Previously, the central bank had been selling $7.3 billion worth of yuan per day, but this drastic reduction came alongside oil giant Rosneft’s 15 billion yuan bond issuance, further draining liquidity from the market.
Top banking executives, including Sberbank CEO German Gref and VTB CEO Andrei Kostin, have called for more active participation from the central bank to address the shortage of yuan liquidity. Gref emphasized the need for foreign currency coverage for lending in yuan, while Kostin highlighted the importance of increasing liquidity through swaps and encouraging exporters to sell more yuan.
Chinese banks in Russia are also feeling the pressure, with concerns over potential secondary Western sanctions leading them to avoid currency trading. The situation has been exacerbated by delays in trade payments from Chinese banks to Russian counterparts, causing billions of yuan to be held up.
While discussions between Russia and China for a joint payment system are ongoing, no immediate solution is in sight. Kostin remains optimistic about the potential for establishing a clearing mechanism for payments in national currencies, citing the balanced nature of trade between the two countries.
Overall, the yuan liquidity deficit in Russia has significant implications for the financial markets, especially as the yuan becomes a more prominent trading currency on the Moscow Stock Exchange. Investors and individuals with exposure to yuan-denominated products should closely monitor developments in this space to mitigate potential risks and capitalize on opportunities that may arise.
