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Russian central bank, sovereign fund may hold $140 billion in Chinese bonds


© Reuters. FILE PHOTO – People pass the Central Bank Headquarters in Moscow on February 11, 2019, Russia. REUTERS/Maxim Shemetov/File Photo

SHANGHAI (Reuters). Russia’s sovereign wealth fund and central bank may be responsible for almost a quarter of the Chinese bond foreign holdings, according to analysts from ANZ Research. These could potentially provide protection against Western sanctions imposed by Moscow after its invasion of Ukraine.

The sanctions placed over Russia’s invasion have caused turmoil in Russia’s financial market, making it the most serious attack against a European country since World War Two.

Russian businesses have explored workarounds to deal with new market allies like China in light of sanctions. Settlements of transactions are being settled using yuan which has been rising against the dollar.

In a note, ANZ strategists and economists stated that they have estimated the yuan bond portfolios of Russia’s central bank at $60 billion and $80 billion respectively.

As of the last month data available, foreign bonds held on China’s interbank bond markets totalled 4.07 trillion won ($644.13billion).

“We’re watching to see if Russia liquidates the assets if there is (yuan cash) required for other payments obligations,” ANZ stated.

In June 2021 the Russian central banks’ foreign currency reserves were 13.1%, while they had 0.1% for June 2017. From 46.3%, dollar holdings fell to 16.4%.

While Russia might be able use yuan assets as well as China’s Cross Border Interbank Payment System, (CIPS), to mitigate the effects of Western sanctions including the bans placed on certain Russian banks in the SWIFT global financial message system, experts said the crisis won’t significantly increase the use of the Yuan.

“CIPS serves primarily as a clearing and over 80% of CIPS transactions rely upon SWIFT Telegram. This is not a replacement for SWIFT.

Underscoring the impact of sanctions over the invasion, rating agencies Fitch and Moody’s (NYSE:) slashed Russia’s sovereign credit rating to “junk” status, following a similar move from S&P Global (NYSE:) last week.

Russia considers its intervention in Ukraine “special”

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