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Russia, China to introduce new sovereign bond to decrease reliance on US Dollar

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MOSCOW: In a move to reduce their reliance on US Dollar, Russia and China after working since 2016 have issued a new Yuan based bond which will not only assist the two economies in avoiding US tariffs but also reduce the impact of any sanctions.

The ‘Renminbi,’ is going to be Russia’s first ever sovereign debt bonds in Chinese currency. It is expected to be launched towards the end of 2019 or early 2020.

According to Anton Bakhtin, an investment strategist with Premier BCS, the global political landscape has drastically changed for both Russia and China, pushing the two nations into a closer partnership.

He said, “While both the countries as well as many other global players are concerned about ‘the dollar hegemony’, the launch of the yuan bond would be good means to resist it. It’s a step towards de-dollarization.” He added further, “While It will take much more time to fully shift away from the greenback, it’s an additional bridge between us and the Chinese investors.”

Russia, like China has not been spared from US sanctions. A set of restrictions which is likely to come into force in August will prohibit US banks from certain types of engagement in the Russian sovereign debt market.

While Moscow currently has enough foreign investors ready to buy government bonds, it is still interested in extending its list of foreign creditors. As Chinese investors do not buy Russia’s ruble-denominated bonds, the launch of the yuan bonds would give them an opportunity to invest in Russian state debt.

It is worthwhile to mention here that while the new bond in the Chinese currency will not change anything particularly in the short-term, it will have an impact in the long run, laying solid foundations for future investments in Russian sovereign bonds.

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