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The Chinese are demanding Russia trade in yuan because the Russian currency has, through a series of impressive self owns, become completely useless. If the Rus

The Chinese are demanding Russia trade in yuan because the Russian currency has, through a series of impressive self owns, become completely useless. If the Russian position was even a little less weak it wouldn’t fly because Russians don’t want yuan for the same reason Chinese people don’t, it’s an illiberal currency unsuitable for trade. That’s getting worse not better, because there is a moderate chance if China relaxed its currency controls it would crater their economy and bring the ruling class to an end. Similarly, the INR is being (slightly) liberalized, not because Indians prefer international trade in their local currency but because it costs them so much to have such a bad currency. There are reasons to think people would prefer a different currency to USD to be the reserve currency but it’s because it’s not liberal enough. Switching to extremely repressive currency regimes like the yuan or the rupee is counterproductive To the people who want a different international trade currency.

georgeplusplus 4y ago
China demands payment in useless currency. What part of this narrative makes sense to you?
- deleted 4y ago
  [deleted]
- kasey_junk 4y ago
  I will buy your car in kasey_junk bucks to explain my point if you want.
  - georgeplusplus 4y ago
    I don't want Kasey junk bucks. Which is why I'm scratching my head at youre reasoning the largest economy in the world would accept worthless currency.
    - kasey_junk 4y ago
      And if I held a gun to your head and demanded that you accept kasey_junk bucks? China has some of the strictest currency controls in the world. To the point if you are doing treasury operations for an international business there you can’t use your normal financial rails to accomplish day to day tasks like manage payroll. No one, including Chinese citizens, want to keep their cash there. For corporations this manifests in added costs, but for individuals (with even moderate means) it becomes a game of hide the assets. So much so that cities in the west are dealing with asset inflation specifically attached to Chinese buyers. China doesn’t have a problem with western citizens over paying for property there. Until a currency liberalizes it can’t become a reserve currency for international trade. So for the yuan we have 2 choices, it liberalizes (and perhaps tanks their leadership) or it stays second class. The current Chinese leadership believes the former is worse than the latter.
      - georgeplusplus 4y ago
        And if I held a gun to your head and demanded that you accept kasey_junk bucks? I don't believe that's whats happening though. The idea that Russia is holding a gun to china's head just doesn't make sense. Russia and China are part of the BRICS economic treaty, and this treaties main purpose is to see the dollar dethroned. I live in China FWIW and I don't see any of what you describe
        kasey_junk 4y ago
        Sorry, we’ve been talking past each other apparently. I believe China is strong arming Russia into using the yuan when Russia would prefer anything else. My belief is that this is a sign of how weak the Russian economy is, not a sign of yuan strength. I 100% believe that the BRICS signatories want to see the dollar dethroned. I’m not even stating an opinion on whether it should be or not. My position is simple, illiberal currencies are not a viable alternative for international trade. A prerequisite for the yuan taking over as reserve currency is it becoming more liberal. That’s not currently the trend. And fwiw I’ve been both a fx trader and worked in treasury operations for an international. I’ve dealt specifically with moving yuan.
- kwere 4y ago
  It's like company wanting to paying people with scrips redeemable to company-mart ( china market) and that locks you in, BCS it could be worthless if you don't use the money quickly and/or outside company premises
  - slim 4y ago
    you're talking about the country that's exporting most consumer goods to the world and has positive trade balance with most countries it is trading with. those yuans are useful to any country in the world. nobody needs to hold yuans, they can readily be transformed in physical goods
rsj_hn 4y ago
> because the Russian currency has, through a series of impressive self owns, become completely useless. Huh. Checks forex rates. Not worthless, USD/RUB went from 100 to 60. It's worth 167% what it was before Feb 2022. How do you explain that? So many people forget that the value of a currency derives from considerations of supply and demand. When Russia said it demands to be paid in Rubles for some commodities, then this created a demand for Rubles. You may not like the demand, but it is a real demand. A net exporting nation is not going to have a worthless currency, rather it will be able to control the value of its currency by either insisting that a portion of its exports be bought with its own currency, or -- equivalently -- allowing its exports to be bought with a tradeable currency and then selling that for rubles. So the strength or weakness of the currency is going to be decided by the net export situation, and as Russia's trade surplus is much higher in 2022 than in 2021, earning roughly $330B in energy exports in 2022, a roughly ~40% increase from last year, it's currency is going to appreciate unless Russia takes steps to devalue it. And that's just energy. Russia is also a major global supplier of fertilizer, wheat, diamonds, gold, titanium, etc. That's what makes the ruble valuable, not what you think of Russia's geopolitical strategy. Currency markets don't reflect the moral value of a nation, they don't reflect their foreign policy, they reflect the net supply and demand for the nation's production. The world is hungry for oil, gas, coal, wheat, fertilizer, wood, titanium, potassium, gold, and diamonds. It is the value of these commodities that gives the Ruble its value. In terms of China, Russia runs large trade surpluses against China because it is a major energy and food supplier to China. It has therefore accumulated a large amount of CNY reserves, just as the record of all those surpluses. It makes sense that it would use some of these reserves to purchase output from CNY or other countries willing to be paid in CNY. That use of foreign reserves does not mean that the Ruble is worthless, it means that Russia is spending some of its foreign reserves. Nothing particularly special going on here - China is more than eager to sell goods to Russia to reduce its trade deficit with that country.
- kasey_junk 4y ago
  And what are the currency volumes? What mechanisms can you use to turn rubles into other currencies that are legal in Russia? Can a bank or investor trade rubles currently? What are the interest rates charged to loan rubles? Those currency controls have the direct impact of making imports expensive or unattainable. Russia is now mulling issuing yuan denominated bonds. As if they were a client state of China. That’s not because their economy is strong. Their trade surpluses are largely because their imports have collapsed. The ruble/yuan pair is quite simply China taking advantage of a Russian economy that is teetering. Extrapolating out anything beyond that about global reserve currencies is folly. [edit] went looking for detailed trade data for Russia and it turns out it’s no longer published by the Russian authorities https://www.reuters.com/article/ukraine-crisis-russia-imports-idUSKCN2MD1T7 https://www.reuters.com/article/ukraine-crisis-russia-import...

georgeplusplus 4y ago

China demands payment in useless currency. What part of this narrative makes sense to you?

deleted 4y ago
[deleted]
kasey_junk 4y ago
I will buy your car in kasey_junk bucks to explain my point if you want.
- georgeplusplus 4y ago
  I don't want Kasey junk bucks. Which is why I'm scratching my head at youre reasoning the largest economy in the world would accept worthless currency.
  - kasey_junk 4y ago
    And if I held a gun to your head and demanded that you accept kasey_junk bucks? China has some of the strictest currency controls in the world. To the point if you are doing treasury operations for an international business there you can’t use your normal financial rails to accomplish day to day tasks like manage payroll. No one, including Chinese citizens, want to keep their cash there. For corporations this manifests in added costs, but for individuals (with even moderate means) it becomes a game of hide the assets. So much so that cities in the west are dealing with asset inflation specifically attached to Chinese buyers. China doesn’t have a problem with western citizens over paying for property there. Until a currency liberalizes it can’t become a reserve currency for international trade. So for the yuan we have 2 choices, it liberalizes (and perhaps tanks their leadership) or it stays second class. The current Chinese leadership believes the former is worse than the latter.
    - georgeplusplus 4y ago
      And if I held a gun to your head and demanded that you accept kasey_junk bucks? I don't believe that's whats happening though. The idea that Russia is holding a gun to china's head just doesn't make sense. Russia and China are part of the BRICS economic treaty, and this treaties main purpose is to see the dollar dethroned. I live in China FWIW and I don't see any of what you describe
      - kasey_junk 4y ago
        Sorry, we’ve been talking past each other apparently. I believe China is strong arming Russia into using the yuan when Russia would prefer anything else. My belief is that this is a sign of how weak the Russian economy is, not a sign of yuan strength. I 100% believe that the BRICS signatories want to see the dollar dethroned. I’m not even stating an opinion on whether it should be or not. My position is simple, illiberal currencies are not a viable alternative for international trade. A prerequisite for the yuan taking over as reserve currency is it becoming more liberal. That’s not currently the trend. And fwiw I’ve been both a fx trader and worked in treasury operations for an international. I’ve dealt specifically with moving yuan.
kwere 4y ago
It's like company wanting to paying people with scrips redeemable to company-mart ( china market) and that locks you in, BCS it could be worthless if you don't use the money quickly and/or outside company premises
- slim 4y ago
  you're talking about the country that's exporting most consumer goods to the world and has positive trade balance with most countries it is trading with. those yuans are useful to any country in the world. nobody needs to hold yuans, they can readily be transformed in physical goods

rsj_hn 4y ago

> because the Russian currency has, through a series of impressive self owns, become completely useless. Huh. Checks forex rates. Not worthless, USD/RUB went from 100 to 60. It's worth 167% what it was before Feb 2022. How do you explain that? So many people forget that the value of a currency derives from considerations of supply and demand. When Russia said it demands to be paid in Rubles for some commodities, then this created a demand for Rubles. You may not like the demand, but it is a real demand. A net exporting nation is not going to have a worthless currency, rather it will be able to control the value of its currency by either insisting that a portion of its exports be bought with its own currency, or -- equivalently -- allowing its exports to be bought with a tradeable currency and then selling that for rubles. So the strength or weakness of the currency is going to be decided by the net export situation, and as Russia's trade surplus is much higher in 2022 than in 2021, earning roughly $330B in energy exports in 2022, a roughly ~40% increase from last year, it's currency is going to appreciate unless Russia takes steps to devalue it. And that's just energy. Russia is also a major global supplier of fertilizer, wheat, diamonds, gold, titanium, etc. That's what makes the ruble valuable, not what you think of Russia's geopolitical strategy. Currency markets don't reflect the moral value of a nation, they don't reflect their foreign policy, they reflect the net supply and demand for the nation's production. The world is hungry for oil, gas, coal, wheat, fertilizer, wood, titanium, potassium, gold, and diamonds. It is the value of these commodities that gives the Ruble its value. In terms of China, Russia runs large trade surpluses against China because it is a major energy and food supplier to China. It has therefore accumulated a large amount of CNY reserves, just as the record of all those surpluses. It makes sense that it would use some of these reserves to purchase output from CNY or other countries willing to be paid in CNY. That use of foreign reserves does not mean that the Ruble is worthless, it means that Russia is spending some of its foreign reserves. Nothing particularly special going on here - China is more than eager to sell goods to Russia to reduce its trade deficit with that country.

kasey_junk 4y ago
And what are the currency volumes? What mechanisms can you use to turn rubles into other currencies that are legal in Russia? Can a bank or investor trade rubles currently? What are the interest rates charged to loan rubles? Those currency controls have the direct impact of making imports expensive or unattainable. Russia is now mulling issuing yuan denominated bonds. As if they were a client state of China. That’s not because their economy is strong. Their trade surpluses are largely because their imports have collapsed. The ruble/yuan pair is quite simply China taking advantage of a Russian economy that is teetering. Extrapolating out anything beyond that about global reserve currencies is folly. [edit] went looking for detailed trade data for Russia and it turns out it’s no longer published by the Russian authorities https://www.reuters.com/article/ukraine-crisis-russia-imports-idUSKCN2MD1T7 https://www.reuters.com/article/ukraine-crisis-russia-import...