Recent data from the Central Bank show a notable downturn in yuan activity within the correspondent accounts of Russian banks overseas, hitting a low not seen since June 2022. The aggregate yuan balance stood at 6.8 billion dollars, reflecting a broader shift in currency usage among Russian financial institutions operating abroad, as reported by RBC.
In December 2023, the value of yuan held in nostro accounts by Russian banks fell by 25.7 percent, a decline amounting to around 2.3 billion dollars. This contraction occurred amid a period during which banks were increasingly issuing yuan-denominated loans within Russia, signaling a strategic pivot to Chinese currency in their domestic lending activities.
Yegor Susin, the General Manager of Gazprombank, noted that in December some loans previously issued in currencies deemed riskier or less favorable were moved into yuan. Susin explained that banks faced a liquidity gap on the passive side and therefore relied on the yuan reserves held in their correspondent accounts to continue extending new Chinese- currency loans.
Expert RA’s Yuri Belikov, a seasoned rating agency executive, suggested that the reduction in yuan balances could be linked to tightened counterparty risk policies abroad. As foreign banks strengthen their exposure controls in the face of secondary sanctions risks, banks operating in Russia may adjust their currency exposure accordingly, including a retreat from yuan holdings in some segments of their international settlement systems.
Market observers have discussed moves that hint at the yuan’s potential to replace some functions traditionally served by the dollar in bilateral trade and finance. While this transition is gradual and uneven, the dialogue around a broader role for the yuan in cross-border transactions continues to evolve as policy changes and market dynamics unfold.
Historically, Russia has managed its foreign exchange reserves with diversification in mind, and recent shifts reflect a broader reallocation strategy. As authorities and banks navigate the evolving sanctions landscape and regulatory expectations, the use of yuan in both international settlements and domestic lending is a point of ongoing adjustment and strategic planning for financial institutions in Russia and its partners. The long-term trajectory will depend on policy signals, liquidity conditions, and the stability of cross-border payment arrangements in the currency markets under discussion.