Despite Ruble Crisis, Russia and China Still Threaten U.S. Trade Interests

image
Author: David Yee
Created: 31 Dec, 2014
Updated: 15 Oct, 2022
2 min read
For about a decade, Russian and Chinese politicians, bankers, and industry captains have been calling for a new world super-currency in an effort to ditch the United States dollar as the primary worldwide trading currency. Even with the current ruble crisis, the plans continue to move forward with a significant currency swap between Russia and China.

Both China and Russia are heavily dependent on American dollars for their exports. Russia's primary export is petroleum and natural gas, while China exports large quantities of consumer goods to American markets.

The real risk for both countries is in their foreign exchange reserves -- with China holding 32 percent of its $4 trillion in reserves and Russia holding almost half of its $400 billion in reserves in dollar-denominated assets. Fluctuation in the American dollar has the potential of severely damaging their total reserve value.

While the treaty coming into force this week only represents CNY150 billion (about $24 billion) in foreign exchange reserves, it is a significant step forward in both countries' efforts to ditch the dollar.

What makes this currency swap special is that it is happening during one of the worst currency crises since the collapse of the Soviet Union.

While the deal for the currency swap was arranged in October with a transaction date of December 29, both countries are winning from the swap. For Russia, it adds confidence in the ruble and increases their reserves in foreign hard currency. For China, any move to increase trade with Russia represents a huge win for their economy, which has suffered from decreased American spending on consumer goods.

Since 2009, China has made currency swaps with over 28 central banks in a move to make the yuan a viable alternative to the dollar in world trade.

Closer to home, Americans should be more interested in the CNY200 billion currency swap with Canada with the inauguration of the FIPA treaty -- and the reality that we could potentially lose the favored status we have with our biggest trading partner in North America.

American politicians need to spend less time wrangling on the ideological catch-phrases and more time actually doing something to protect American trade and our currency's place as the world reserve currency. The time to do something is now --by strengthening relationships with trading partners, being active in developing countries, and having a foreign policy that attracts foreign investment.

The finer points of liberal or conservative dogma won't mean much if we allow our own currency to become a second rate standard in the world.

Photo Credit: Oleg Golovnev / Shutterstock.com

IVP Donate

Latest articles

Oakland and San Francisco
Analysis: Popular Oakland Ranked Choice Voting System Used to Decide City's Next Mayor
On Tuesday, Oakland, CA used ranked choice voting (RCV) in special elections for mayor and City Council District 2 – marking Oakland’s 5th mayoral election using RCV. A 2024 poll found that 77% of Oakland voters are satisfied with the election method. ...
16 Apr, 2025
-
2 min read
Someone putting on a i voted sticker.
Forward Party Launches New Mexico Chapter after Open Primaries Success
A new party launched Tuesday in New Mexico following the passage of open primaries legislation in the state. The Forward Party, which advocates for reforms like open primaries, is seeking 3,500 signatures to gain minor party status....
16 Apr, 2025
-
2 min read
Person holding up a cannabis plant.
On Top of New Tariffs and Proposed Vape Ban, Calif. Cannabis Retailers Also Face an Excise Tax Hike
As California’s legal cannabis industry heads into the second half of 2025, store owners are facing a combination of rising costs that could further disadvantage them against the state’s still-thriving illicit market....
16 Apr, 2025
-
3 min read