Russia’s Finance Ministry and the Central Bank of Russia (CBR) will increase the sales of Chinese yuan on the domestic foreign exchange market to RUB8.4bn daily in the period of October 7 to November 6, making a net intervention of RUB5.3bn worth of CNY sales, Renaissance Capital wrote on October 4.

In a separate report The Bell wrote that the Russian domestic market saw a yuan liquidity shortage in the summer, as some large exporters turned to borrowing in CNY amid ruble interest rates approaching 20%.

In May 2024, the share of transactions involving yuan on the Moscow Exchange (MOEX) had reached 54%. After US sanctions were imposed on MOEX this summer, that figure soared to 99.8% (to compare, prior to the full-scale military invasion of Ukraine, over 80% of currency transactions were in US dollars, with the remainder in euros).

In 2024, the average interest rate on corporate loans in rubles for large borrowers amounts to 17.17% for loans under one year and 14.74% for loans over one year. The rates for yuan-denominated loans are much lower at 7.11% and 8% respectively (79% of these loans are for terms under one year).

However, in summer 2024 the Russian currency market faced a shortage of yuan liquidity, as demand for the Chinese currency outstripped supply and banks could not cover their open currency positions. This liquidity shortage peaked in September, with the rate on one-day yuan repo operations surging to over 212% on some trading days.

In the meantime, the CBR reportedly increased the cost of ruble-yuan currency swaps. In September the CBR deputy governor Alexei Zabotkin argued that swaps should not be used by banks to solve their own funding issues under the false pretence of addressing liquidity problems. 

Liquidity is a bank's ability to make payments in the currency requested by a client, while funding relates to the balance structure between deposits and loans in a particular currency. “This is where the ball is in the banks' court – they need to ensure that their lending activity aligns with their ability to attract foreign currency liabilities,” Zabotkin argued, suggesting that the banks source the currency they need on their own. 

However, how there would be enough CHY accumulated inside Russia to form a deposit base for the currency is unclear, the analysts surveyed by The Bell said.

In addition, the yuan liquidity can be moved by large debt issues, such as Rosneft’s yuan-denominated bonds worth RUB15bn that matured on September 20 and had bondholding banks scramble to accumulate yuan to cover Rosneft’s obligations.