China allows usage of ruble instead of US dollar
10 Aug 2015 7:04 AM IST
The People’s Bank of China (PBC) authorised Suifenhe City in Heilongjiang Province as a pilot zone where the <g data-gr-id="25">ruble</g> can be officially used alongside the yuan instead of US dollar. Jin Mei, deputy secretary-general of the monetary policy committee of the central bank, made the announcement yesterday at the opening ceremony of a trade exposition in Suifenhe, state-run Xinhua news agency reported.
The circulation of the Russian ruble in the border city is a result of the “benign development” in settling bilateral trade with yuan and ruble instead of US dollar, Jin said. <g data-gr-id="27">Suifeihe</g> City is the major hub of Heilongjiang Province’s trade with Russia. The city accounted for 80 <g data-gr-id="28">per cent</g> of Heilongjiang’s export of goods to Russia and reported a foreign trade of $7.59 billion in 2014. Ruble is already widely used in Suifenhe, particularly in shops and hotels targeting Russian customers, local sources said. City officials believe that legalising the use of <g data-gr-id="29">ruble</g> will promote bilateral economic cooperation and boost tourism. The pilot project will not threaten the renminbi as the domestic currency, they said.
China and Russia signed a currency swap agreement in 2014 as a foundation for financial cooperation between the two nations as the two countries are getting closer in the backdrop of US and EU sanctions against Moscow over the Ukraine crisis. Cross-border yuan-dominated payments between China and Russia reached 8.22 billion yuan ($1.32 billion) in the first half of 2015, <g data-gr-id="23">a 112-per</g> cent year-on-year increase, Jin said.
China faces deflation as producer prices slide to low
Saddled with the economic slowdown, China, world’s second largest economy, faced deflation risk as the producer prices continued to fall in July, touching the lowest level since 2009. The producer price index (PPI), a measure of costs for goods at the factory gate, fell 5.4 <g data-gr-id="64">per cent</g> year on year in July, widening from the 4.8 <g data-gr-id="65">per cent</g> drop seen a month earlier, data from the National Bureau of Statistics (NBS) showed on Sunday.
The July reading dipped to the lowest level since the end of 2009 and marked the 41th straight month of decline, state-run Xinhua news agency reported. Specifically, prices of production materials fell 6.9 per <g data-gr-id="69">cent,</g> while those of consumer goods edged down 0.3 <g data-gr-id="66">per cent</g>. For the first seven months, PPI averaged at a 4.7 per cent drop year on year. On a monthly basis, the index went down 0.7 <g data-gr-id="67">per cent</g> in July. NBS statistician Yu <g data-gr-id="68">Qiumei</g> attributed the PPI contraction mainly to dropping prices of industrial products and decreasing costs for oil and natural gas production.
“Domestic demand remained sluggish, and commodity prices were on the decline. China still faces grim deflation risk,” Qu Hongbin, chief China economist at HSBC said. In a sign of weak demand, China’s imports nosedived by 8.6 <g data-gr-id="62">per cent</g> in July. A sharp decline of 8.9 per cent in exports also cast a shadow on the world’s second largest economy.
To make things worse, major commodity prices are lingering at multi-year low, and there are no signs of quick recovery.The World Bank predicted that energy prices will average 39 per cent below 2014 levels this year, with metal prices down 16 per cent and iron ore plummeting 43 <g data-gr-id="63">per cent</g>.
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