Struggling Breathe Bountifully Amid Currency Paucity - Russia's Economic Predicament
Lack of Yuan Adoption for Russian Corporate Loans
It seems the Yuan isn't cutting it for Russian businesses when it comes to foreign currency loans. The issue? A serious shortage of yuan liquidity.
Anatoly Popov, Sberbank of Russia's Deputy Chairman, shed some light on this situation, stating that there's practically no yuan liquidity in the market. This means that apart from isolated instances, new yuan loans are non-existent.
Popov explained that both exporters and businesses within the ruble zone are being compelled to secure funding in rubles due to an increased demand for credit resources. Historical mechanisms that once compensated for this demand are no longer enough.
Surprisingly, Popov added that the population and businesses in the aggressor country aren't significantly boosting their yuan deposits. The yuan hasn't yet become a go-to savings currency for Russians. Instead, they seem to favor dollars and euros.
Companies receiving foreign currency revenue have been selling it locally and converting it into rubles for their activities. However, this excess foreign currency doesn't significantly impact overall currency liquidity.
Sberbank of Russia also mentioned an increase in demand for rupee loans and reportedly handled a small number of such deals.
Insight: While the Yuan's use in international transactions is increasing, particularly between China and Russia, its adoption for corporate loans among Russian companies remains minimal. Several reasons contribute to this, such as China's capital controls, the dominance of the US dollar, limited market liquidity, risk perceptions, and the need for significant adjustments in banking infrastructure.
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The Yuan's adoption for corporate loans within the Russian business sector is minimal, with the industry largely relying on the US dollar for funding due to numerous factors such as China's capital controls, the dominance of the US dollar, limited market liquidity, risk perceptions, and the need for significant adjustments in banking infrastructure.
In the realm of finance, the Yuan hasn't yet become a popular choice for savings among Russian businesses and population, with a preference for dollars and euros instead.
