Chinese Yuan Becoming Preferred Currency in Russia’s Far East

China has created a land channel for the delivery of cash to Russia’s Far East region, having noted a surge in demand for the yuan there. At the same time, Russian business is generally increasing its settlements in yuan, Nezavisimaya Gazeta reported citing Russian officials.

Yuan cash is convenient in that it helps businessmen to optimize taxes in foreign trade transactions. According to the report, the circulation of Chinese yuan in Russia’s Far East in financial transactions between enterprises has for years been playing a major role in the people’s lives there.

The Chinese yuan is gaining increasing popularity in the Russian Federation not only in individual settlements but also for legal entities. According to the newspaper, yuan circulation has been rising for several years. Thus, in Q1 2016, the volume of foreign trade deals in Chinese yuan for Sberbank’s Far Eastern clients grew 30% compared to Q4 2015 and amounted to 100.3 million yuan ($15.63 million).

The trend is partially stimulated by Russians in traveling to China and growing trade ties between the countries. The Russian Ministry of Economic Development has said that by the end of this year, the volume of Russian-Chinese trade will reach $100 billion.

Mikhail Shchapov, a member of the Russian parliamentary committee on budget and taxes, believes that the growing popularity of the yuan incurs massive damage to the Russian budget.

“Cash is accumulated in Chinese markets, then invested in illegal logging, and hotels. Similarly, there is a grey market, where, for example, tourist services are provided by Chinese citizens – guides, translators, hotel owners – in Russia, and payments are made in yuan. That means, that money does not even come to Russia, taxes are not taken from them, there is no control,” he told the newspaper.