Chinese traders doing business in Russia are set to benefit as the Chinese renminbi (RMB) is now an accepted currency for international settlements in border trade.
According to an agreement signed by the two countries' central banks in 2002, the RMB and rouble can be used for trade settlements and payment, instead of the US dollar, in Chinese and Russian banks from January 1, 2005.
Traders from the two countries are praising the move, saying it will slash transaction costs and be far more convenient.
Scholars say this is a fresh step in the Chinese currency's international ambitions.
"The RMB goes beyond the border and is used for international settlement, signalling its rising international status," Yi Xianrong, an economist from the Chinese Academy of Social Sciences, was quoted by China Business News as saying.
The RMB has been widely accepted in trade with a number of neighbouring countries and regions such as the Philippines, Viet Nam and Nepal. Japan and the Republic of Korea also signed agreements with China to accept its currency.
Chinese officials and analysts declared their confidence in brighter trade and closer economic ties between China and Russia in 2005, as economic growth and market liberalization gather pace.
Increases in trade volume between China and Russia, which together cover about 20 per cent of the world's land area and both registered more than 7 per cent annual economic growth in the past four years, may alter the global trade scenario.
"The trade growth rate in 2005 is expected to be no less than 20 per cent, which will lay solid ground for achieving a trade volume of US$60-80 billion by 2010 - a goal launched by the two countries' leaders in October," said Sun Yongfu, director of the European Affairs Department of the Ministry of Commerce.
China and Russia witnessed a trade volume of US$19.3 billion from January to November last year, reflecting an increase of 35.8 per cent year-on-year. And the figure will surely exceed US$20 billion for the whole of 2004, said Sun.
The increase belittles global trade growth over the same period, which was expected to stand at 8.5 per cent, according to a report released by the World Trade Organization (WTO) in October.
This blistering rise is expected to continue in the foreseeable future, said Liu Huaqin, a researcher at the Chinese Academy of International Trade and Economic Co-operation, a think-tank of the Ministry of Commerce.
She cited the robust economic growth of both nations as the fuel for bilateral trade.
"Both countries have ambitions to double their GDP in a decade," she said. "This will offer ample room for the growth of trade in the future."
Based on her calculations, China's imports from Russia will increase by 11 per cent if China's annual GDP growth maintains a 7 per cent level. And Russian imports from China will stand at about 9 per cent if its economy advances at a pace of 5 per cent.
In the past four years, Russia's GDP growth averaged more than 7 per cent, with China's exceeding 8 per cent. Both outperformed the world's average of less than 4 per cent.
And the complementary nature of the two economies will also bode well for trade growth, said Liu.
Raw materials such as crude oil, steel, timber and paper pulp dominate Russian exports to China, while the latter largely sells consumer goods such as clothes, household electrical appliances and plastic products to its neighbour.
"China will have a bigger appetite for raw materials to feed its booming economy in the future," said Liu. "And increasingly wealthier Russian consumers will demand more consumer goods, which China is good at making."
Progress in reforming the market economies of both nations is another boost to future trade relations, said Liu.
The two sides granted each other market economy status and vowed to open their markets wider to each other in October.
Fan Ying, a professor from China Foreign Affairs University, added yet another reason to expect a jump in bilateral trade in the future.
"Chinese companies will be more willing to export to Russia, in a bid to reduce the reliance on other major export destinations such as the United States, Japan and the European Union, where they face stiffer competition and a mounting likelihood of anti-dumping charges," she said.
"This also echoes the nation's strategy of diversifying its export markets," she added.
Russia is the Chinese mainland's eighth largest export destination, based on trade volume from January to November 2004.
During that period, the Chinese mainland sold exports worth US$8.2 billion to Russia, about US$4 billion less than the seventh largest -- Taiwan Province.
"Chinese exporters should expect bigger markets in Russia," said Fan.
(China Daily January 12, 2005)