The share of Russia's imports invoiced in Chinese yuan soared to 20% in 2022 from 3% a year earlier after its invasion of Ukraine unleashed a raft of sanctions that cut the country out of the global financial system, a new study found on Wednesday.
The sharp increase represents a shift away from U.S. dollar and euro transactions, which declined in the same period to 67% from up to 80%, the European Bank for Reconstruction and Development (EBRD) found in the report.
"After Russia’s full-scale invasion of Ukraine in February 2022 and the imposition of economic sanctions by the EU, US and a number of other advanced economies, Russian imports became increasingly invoiced in yuan," according to the paper led by economists Maxim Chupilkin and Beata Javorcik.
Yuan invoices now accounted for 63% of imports from China by end-2022, up from nearly a quarter a year earlier, and had now "displaced primarily the U.S. dollar as well as the Russian rouble as the currency of choice," the authors said.
The use of the Chinese yuan for trade with Russia has also increased for third countries that did not impose economic sanctions but hold a currency swap line with the People's Bank of China (PBOC), such as Mongolia and Tajikistan.
These swap lines "make it easier for an exporter to use yuan received from, say, a Russian importer," the paper added, after analysing more than 12 million import records associated with over 70,000 firms.
Overall, economic sanctions could herald a gradual shift away from the U.S. dollar, the study said.
"The dominance of the U.S. dollar makes international sanctions more effective, as firms engaged in international trade overwhelmingly require payments to be cleared through the U.S. banking system," the authors found.
"At the same time, the use of economic sanctions may over time reduce attractiveness of the U.S. dollar as a vehicle currency and hence its dominance."
In March, the yuan - also known as the renminbi - became the most widely-used currency for cross-border transactions in China, overtaking the dollar for the first time, official data showed, although its share as a global payments currency remains small at 2.5%, according to data from international payments system SWIFT, compared with 39.4% for the dollar and 35.8% for the euro.
