The expansion of the NBK's instruments is not an urgent anti—crisis measure, but a planned step in the long-term strategy of internationalization of the yuan. But its significance for Russian business in the current situation is quite specific.
What are yuan repos and why are they needed?
A REPO (from the English repurchase agreement) is a short—term operation in which a bank or central bank sells securities with the obligation to buy them back after a certain period of time. For the international yuan market, REPO is a mechanism for replenishing liquidity: foreign banks that have yuan assets can receive yuan liquidity through REPO with the NBK.
The new NBK instruments (7 days, 1 month, 3 months) expand the available horizons of this liquidity. Instead of a single short—term instrument, a set appears that covers different time horizons, which makes yuan financing more convenient for banks operating in international settlements.
Why is this important for Russian-Chinese trade
All 100% of the official Russian-Chinese trade is now conducted in rubles and yuan, without the dollar. Yuan liquidity in the international market is a critical parameter for this system. The more yuan-denominated instruments available to intermediary banks, the easier and cheaper it is to make payments.
The expansion of the NBK's swap lines with other central banks (Russia is among the users of the CBR-NBK swap line) also increases the available yuan liquidity for the Russian side. This reduces transaction costs when converting rubles to yuan to pay for Chinese supplies.
Analysts: the yuan will continue to grow
"The yuan is increasingly being used in international settlements, and other central banks have begun to actively use the NBK's swap lines. The expansion of the list of yuan-denominated instruments seems quite justified. We believe that the yuan exchange rate will continue to rise in the medium term. If the dollar strengthens, a sideways movement and a return to volatility are likely," BCS analysts commented.
The growth of the yuan against the dollar while simultaneously weakening the ruble against the dollar is a double pressure on the ruble value of yuan purchases. The yuan at 11.07 with a forecast of further growth is no longer a temporary phenomenon, but a new reality.
Practical implications for calculations
For companies using CIPS (the Chinese payment system, an analog of SWIFT for yuan transactions): the expansion of the yuan REPO makes CIPS member banks more liquid, which potentially reduces the cost of yuan transactions and speeds up their processing.
For companies storing balances in yuan as an operating currency: increased yuan liquidity reduces conversion spreads and makes yuan storage more convenient. With the forecast of further yuan growth, it is more profitable to keep the operating balance in yuan than to convert it into rubles between transactions.
