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Ruble Crash: China Pledges to Support Russia [Copy link] 中文

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Post time 2014-12-22 17:23:55 |Display all floors
This post was edited by laoda1 at 2014-12-22 17:38

Enter the Dragon

Ruble Crash: China Pledges to Support Russia

Alexander Mercouris

Dec 22, 2014

Though it has been entirely unreported in the West, Chinahas been saying all week that it stands ready to support Russia if its help isneeded.  

With $3 trillion of reserves the sums necessary would fromChina’s point of view be small change.  

The only condition is that Russia must first ask China forassistance, as this editorial in the semi-official English language Chinesenewspaper Global Times sets out.  

Global Times  belongsto The People’s Daily, the official newspaper of the Communist Party of China,so an editorial published by Global Times has official sanction and representsthe opinion of the Chinese government.

Putting the question beyond any further doubt were commentspledging support for Russia from the Chinese Foreign and Commerce Ministers asreported by the Russian TASS news agency, which we also reproduce below.

With oil prices sinking and the ruble falling in value,Russia is experiencing the gravest economic crisis since the turn of thecentury. After its value crashed for two days running, the ruble hasdepreciated over 50 percent against the US dollar so far this year to becomethe worst performing global currency. At present, there seems to be no way tobail it out, and what will happen to the Russian economy is difficult topredict.

Some analysts are comparing Russia's current situation withthe eve of the Soviet Union's dissolution, when oil prices were also at a lowebb. Some speculate that the deepening economic crisis will impose newchallenges to Russian President Vladimir Putin's tenure, forcing him to apply adefensive strategy. But there are also some concerns about him becoming moreaggressive.

This speculation raises a question: Is Russia's economyworse now than the time when the Soviet Union collapsed?

Compared with 23 years ago, Russia's manufacturing capacityand agricultural production have not greatly improved, and it's much diminishedstrength has not left much room to maneuver. What's more, Moscow now facesWestern sanctions and there is deep antagonism between Moscow and Washington.

But Russian society is much more united than before. Putinretains high approval ratings among the Russian public, who learned heavylessons after the collapse and harbor no delusions toward the West.

Russia's foreign exchange reserves still boast about $400billion, which means, unlike immediately following the dissolution of theSoviet Union, the well-being of the Russian people will not be severelyimpacted in the short term. Although the threat of collapse is still far away,Russia will go through a long-running winter instead of a temporary storm.

China has become a significant factor that determinesRussia's strategic environment. Seeking China's support is one of Russia's mostrealistic options.

While it might play a key role, China has to keep a clearmind when giving a helping hand to Russia. China-Russia cooperation is nolonger ideology-based but driven by common interests. Although it has thecapability to offer help to Russia at critical moments, China does not have toact in a proactive manner.

Any facilitation and aid must be given with the request ofMoscow through the normal channels of country-to-country exchanges. This willreduce Moscow's misunderstandings to the minimum.

This crisis will probably urge Russia to recalibrate some ofits national strategies. But it is by no means a fact that Russia will drawcloser to China because of this. With many uncertainties, China also faceschallenges about how to lead its relationship with Russia to a reciprocal end.

Russia is at a crossroads, and the direction it chooses willimpact world politics. China's stance is clear, and it does not want Russia tocollapse.

The following article appeared on the website of the Russiannews agency TASS.

China believes Russia will be able to overcome the currenteconomic problems, and is ready to offer whatever assistance if needed, China’sForeign Minister Wang Yi said in an interview with Hong Kong’s Fenghuangtelevision channel on Sunday.

“We believe that Russia has opportunities and knowledge toovercome the current problems in the economy. The Chinese-Russian relations ofstrategic partnership are at a high level, we are always supporting and helpingour friend. If the Russian side needs it, we shall offer all possible supportwe may have,” the foreign minister said.

China’s Minister of Commerce Gao Hucheng told Fenghuangwhile commenting on the situation with rouble: “As for certain fluctuations inthe stock market and the fluctuations in the currency market - they may be ofcertain interest for some capital investors, and from the practical cooperationpoint of view - we are still calm and promote actively our cooperation.”

The minister of commerce also expressed confidence thecurrent financial and economic situation in Russia would not afflictimplementation of the major Russian-Chinese projects in the energy, industriesand other spheres.

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Post time 2014-12-22 23:22:01 |Display all floors

Beijing willing to assist Moscow

(China Daily)    08:46, December 22, 2014

China's top diplomat is offering Beijing's assistance to Moscow, as pessimism is spreading about the uncertainties of the Russian economy.

With the Kremlin vowing to address Russia's dependence on oil and gas, more teamwork with China in non-energy sectors may help, but the key "lies in the hands of Moscow itself", analysts said.

Following the drastic drop of oil prices, the Russian rouble plummeted on Tuesday and has lost nearly 50 percent against the US dollar and the euro since March.

Foreign Minister Wang Yi told reporters on Saturday that "Russia has the capability and the wisdom to overcome the existing hardship in the economic situation".

"If the Russian side needs, we will provide necessary assistance within our capacity," Wang said.

Wang said China and Russia have been consistently supporting and helping each other.

Feng Yujun, a senior analyst of Russian studies at the China Institutes of Contemporary International Relations, estimated that "the hardest time for the Russian economy is just kicking off, with the upcoming three years clouded by major challenges".

The researcher pointed to a strengthening US dollar, and said emerging economies including Russia will suffer more as money increasingly flows back to the US.A major turnaround of the suffering economy "requires a range of measures to take effect", Feng said.

Russian President Vladimir Putin said on Thursday at an annual end-of-year news conference in Moscow that cooperation with China is one of the cornerstones of Russia's economic recovery and prosperity.

Zhang Deguang, a former Chinese ambassador to Russia, said Moscow has foreign currency reserves totaling hundreds of billions of dollars, and with such support the Russian economy "is still far away from being totally paralyzed".

Li Jianmin, a researcher at the Chinese Academy of Social Sciences, suggested that China's assistance be provided through mechanisms including the Shanghai Cooperation Organisation and BRICS.

Earlier this month, when Russian Prime Minister Dmitry Medvedev met in Astana, Kazakhstan, with Premier Li Keqiang, they agreed on enhancing cooperation in railways, infrastructure and the development of Russia's Far East region.

Loans, cooperation in major projects and participation in the domestic infrastructure investment in Russia are options on the table, Li added.

Qin Gang, the Foreign Ministry spokesman, told a news conference in Beijing on Thursday, "Please do not forget that China and Russia are highly complementary in the economic field, with broad areas and huge potential for cooperation."

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Post time 2014-12-23 00:33:16 |Display all floors
Though it has been entirely unreported in the West, Chinahas been saying all week that it stands ready to support Russia if its help isneeded.  

With $3 trillion of reserves the sums necessary would fromChina’s point of view be small change.  

The only condition is that Russia must first ask China forassistance, as this editorial in the semi-official English language Chinesenewspaper Global Times sets out.  

This ought to be an interesting scenario... given if a bailout of Russia will come with gift of having a stabile oil supply for the near future that will not depend on a global network on oil tankers.  Flipside - will that flow from the North mean that the powers to be in Beijing will curb its gaze to the South China Sea?

Regardless, it has been an interesting exercise in 'Multipolarism' this year in global politics - both from the standpoint of resources, and 'friends with benefits'.
China's Eccentric 'Uncle Laowai' from Chicago, IL

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Post time 2014-12-23 00:33:23 |Display all floors

Wow, first time I have seen a double posting in a few months

This post was edited by tradervic at 2014-12-22 10:34

Thought the upgrades took care of this?
China's Eccentric 'Uncle Laowai' from Chicago, IL

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Post time 2014-12-23 12:32:07 |Display all floors

China proposes broadening use of Yuan for trade with Russia

Chen Aizhu and Huang Kai
BEIJING Sun Dec 21, 2014 12:18am EST

(Reuters) - China's trade minister proposed more use of China's currency in settling trade with Russia in the face of a falling rouble to ensure safe and reliable trade, Hong Kong broadcaster Phoenix TV reported on Saturday.

The rouble has fallen about 45 percent against the dollar this year, and suffered particularly steep falls early last week. President Vladimir Putin has declined to call it a crisis and said it would eventually rise again.

Chinese Minister of Commerce Gao Hucheng said the use of China's yuan, or renminbi, has been increasing for several years but western sanctions on Russia had made the trend more prominent, Phoenix TV said on its website

Gao said China and Russia were capable of achieving this year's trade target of $100 billion. Last year, trade between the two gained 1.1 percent at $89.2 billion, according to Chinese customs figures.

"Capital investors may be more interested in a volatile stock or foreign exchange market. But in terms of concrete cooperations (between the two nations), we shall have a balanced mentality and push forward those cooperations," Gao was quoted as saying.

Cooperation on energy and manufacturing projects would not be greatly affected by the situation in Russia, Gao said. China would instead focus on fundamental factors such as how the two economies complement each other, he said.

For China, curtailing the influence of the dollar fits well with its ambitions to increase the influence of the yuan and eventually turn it into a global reserve currency.

With 32 percent of its $4 trillion foreign exchange reserves invested in U.S. government debt, China wants to curb investment risks in the dollar.

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Post time 2014-12-23 13:40:43 |Display all floors

Ruble Swap Shows China Challenging IMF as Emergency Lender

By Ye Xie  
Dec 23, 2014

China is stepping up its role as the lender of last resort to some of the world’s most financially strapped countries.

Chinese officials signaled on the weekend they are willing to expand a $24 billion currency swap program to help Russia weather the worst economic crisis since the 1998 default. China has provided $2.3 billion in funds to Argentina since October as part of a currency swap, and last month it lent $4 billion to Venezuela, whose reserves cover just two years of debt payments.

By lending to nations shut out of overseas capital markets, Chinese President Xi Jinping is bolstering the country’s influence in the global economy and cutting into the International Monetary Fund’s status as the go-to financier for governments in financial distress. While the IMF tends to demand reforms aimed at stabilizing a country’s economy in exchange for loans, analysts speculate that China’s terms are more focused on securing its interests in the resource-rich countries.

“It’s always good to have IOUs in the back of your pocket,” Morten Bugge, the chief investment officer at Kolding, Denmark-based Global Evolution A/S who helps manage about $2 billion of emerging-market debt, said by phone. “These are China’s fellow friends and comrades, and to secure long-term energy could be one of the motivations.”

The ruble jumped 4.9 percent to 55.8 per dollar in Moscow on Monday after Hong Kong-based Phoenix TV cited China’s Commerce Minister Gao Hucheng as saying that expanding the currency swap between the two nations would help Russia.

Ukraine’s Allies

The ruble has gained 10 percent over the past two days, paring a selloff that’s made it the world’s worst performing currency over the past six months.

Unlike Ukraine, where the pro-west government received a $17 billion IMF-led bailout this year, Russia, Argentina and Venezuela are often at odds with the U.S. and its allies, essentially keeping them out of the reach of the Washington-based institution. At $3.89 trillion, China holds the world’s largest foreign-exchange reserves, allowing it to fill the void.

China and Russia signed a three-year currency-swap line of 150 billion yuan ($24 billion) in October, a contract that allows Russia to borrow the yuan and lend the ruble. While the offer won’t relieve the main sources of pressure on the ruble -- which has lost 41 percent this year amid plunging oil prices and sanctions linked to Russia’s annexation of Crimea -- it could bolster investors’ confidence in the country and help stem capital outflows.

Argentina Reserves

Two phone calls to China’s central bank seeking comment on the terms of its currency swaps weren’t returned. Russia isn’t in talks with China about any financial aid, Dmitry Peskov, a spokesman for President Vladimir Putin, said on Dec. 20.

Funding from China has helped raise Argentina’s foreign reserves to a 13-month high of $30.9 billion, a boost for a country that has been kept out of international capital markets since defaulting on foreign obligations in 2001.

Argentina received $1 billion worth of yuan earlier this month as part of the three-year currency-swap agreement with China, a central bank official in the South American country, who asked not to be identified because he isn’t authorized to speak publicly, said Dec. 11. That extended the funds transfered to Argentina to $2.3 billion since October. The swap is for a maximum of $11 billion over three years.

$21 Billion

In Venezuela, President Nicolas Maduro last month added $4 billion he borrowed from China to the country’s reserves after they fell to an 11-year low. The country now has about $21 billion in its coffers, equal to the amount of debt it has coming due in 2015 and 2016.

Venezuela, which was already plagued by shortages of everything from toilet paper to toothpaste, is also suffering from the drop in oil, its biggest export. Traders are betting that there’s an 89 percent probability that Venezuela won’t be able to make good on its debts over the next five years, according to credit-default swaps data compiled by Bloomberg.

“I don’t think this is a broad policy to support any country that asks for Chinese help,” Steffen Reichold, an economist at Stone Harbor Investment Partners in New York, said in an e-mail. “Several countries are currently in a tight spot and the Chinese are offering to help. That buys them some goodwill and influence, and promotes the use of the yuan.”

U.K., Australia

The People’s Bank of China has signed currency-swap agreements with 28 other central banks around the world, including those in the U.K. and Australia, making the yuan an alternative to the dollar for global trade and finance.

By promoting the use of its currency, China acts in its own interests as it challenges the dominance of the U.S. in the global economy.

Two months after Crimea voted to rejoin Russia in March, China signed a three-decade, $400 billion deal to buy Russian gas. Oil imports from Russia hit an all-time high in November, according to China’s General Administration of Customs. While the ruble’s depreciation affected Chinese exports to Russia and made it difficult for the two countries to implement joint projects, the challenges shouldn’t be exaggerated, according to a commentary published in the official People’s Daily newspaper today.

China has made $47 billion in loans to Venezuela since 2007, making it the country’s largest creditor, according to Eurasia Group, a political consulting firm. Venezuela, which holds the world’s largest oil reserves, repays the loans by shipping crude to China.

In July, Xi signed trade and investment agreements for at least $7.5 billion in Argentina, cementing China’s ties to the world’s third largest soybean producer.

“China is playing an increasingly more important role and is willing to engage,”Michael Ganske, who oversees $8 billion as the head of emerging markets at Rogge Global Partners Plc, said by e-mail from London. “There is geo-strategic importance connected with” the funding deals, he said.

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Post time 2014-12-23 14:47:42 |Display all floors
everybody is SHADOW BOXING.........

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