As Russian President Vladimir Putin and Chinese President Xi Jinping work to show the world their blossoming bromance, one result of the bilateral talks during Xi’s three day trip to Moscow is worth noting — the agreement between the two nations to conduct bilateral trade in their own national currencies.
According to the draft decree approved through that government document, “settlements and payments for goods, service and direct investments between economic entities of the Russian Federation and the People’s Republic of China are made in accordance with the international practice and the legislation of the sides’ states with the use of foreign currency, the Russian currency (rubles) and the Chinese currency (yuan).” Economic entities agree on the choice of the payment currency and the way of payment independently, wrote Russian state news agency TASS.
“The sides deepen the cooperation in the field of national payment card systems and within the framework of the Russian and Chinese legislation provide support to commercial banks in their independent decision-making on joining the payment system in the state of the other side,” the document said.
The sanctions imposed by the Trump administration on Russia and tariffs imposed on Chinese imports coming into the United States have further incentivized both countries to leave the financial hegemony of the U.S. banking system which has existed since the end of World War II.
There are serious ramifications to the removal of the US dollar from international as this artificial demand for the U.S. currency will disappear, possibly leading to currency devaluation and higher interest rates for Americans.
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