Russia Shifting Economic Craft and the Role of Yuan

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In the first week of December 2025, the Russian government issued its first Renminbi (RMB)-denominated bonds. The total volume of the two bond issues was 20 billion Chinese yuan, with the first tranche representing RMB 12 billion in bonds maturing in 2029 at 6%, and the remaining 8 billion maturing in 2033 at 7%. The bonds are, in part, intended to serve as a new instrument to lower the opportunity cost for Russian exporters who have accumulated significant yuan deposits from trade and to diversify their portfolios, a process that will be further strengthened by planned repo operations. The Ministry is said to be prepared to issue such securities annually in volumes similar to those of replacement bonds with euro- and dollar-maturity. (Ministry of Finance Russia, 2025)

This issuance comes as part of Moscow’s broader maneuver to circumvent U.S. and European Union (EU) sanctions amid elevated domestic interest rates and a growing budget deficit, projected to add a further 15 trillion in sovereign debt for 2026-2028. The Russian Finance Minister has nevertheless argued that the primary rationale for the RMB bonds is market deepening rather than deficit financing. The main takeaway is that this latest placement of Federal Loan Obligations (OFZ) bonds in renminbi marks an important validation of the yuan as an alternative funding mechanism for reducing Russia’s exposure to the euro and the dollar.

Although the process of de-dollarization and refinancing euro-denominated debt accelerated rapidly after 2022, Russia’s economic statecraft has been evolving since the annexation of Crimea in 2014. The underlying economic strategy has increasingly centered on security and autonomy rather than economic growth and efficiency. This has involved reconfiguring “unfriendly” Western business interests within the politically aligned segment of Russian capital, redirecting trade toward the Global South, and altering the currency composition of foreign exchange reserves. (Kashin et al., 2025)

As of mid-January, Russia’s foreign exchange reserves stood at USD 769.1 billion, a record high driven largely by the revaluation of gold prices. The share of U.S. dollars in these reserves has fallen sharply over the past decade, from more than 40% in 2013 to 16.4% in 2021, as assets were shifted into gold, yuan, and other currencies (Shagina, 2022). Russia’s National Welfare Fund (NWF), which forms part of these international reserves, has closed all euro- and dollar-denominated accounts since 2023. The NWF totalled RUB 13.4 trillion (6.2% of Gross Domestic Product), or roughly USD 171.5 billion, though only about USD 52.2 billion qualified as liquid assets held at the Bank of Russia at the end of December 29, with the composition of these liquid assets being USD 29.99  billion. (Ministry of Finance Russia, 2026)

A distinctive feature of the Russian adjustment is that it integrated multiple layers of RMB usage simultaneously in trade settlement, financial issuance, payments infrastructure, and commodity invoicing. This multifaceted integration is what makes the Russian case analytically significant.

International Currency Prereqs and RMB internationalisation

Chinese leadership is closely following the deployment of economic tools as weapons. For Beijing, sanctions against Russia have validated long-held concerns since 2008, regarding overdependence on dollar platforms and Western clearing networks, and have strengthened arguments in favour of pursuing independence-forming strategies in international finance. Party-state discourse increasingly emphasises the orderly and prudent openness of the RMB as an international currency and continues to introduce and upgrade infrastructure to facilitate its internationalisation, albeit with Chinese characteristics.

The hallmarks and determinants of an international currency are defined by the roles it plays for both private market actors and governments, analogous to the basic monetary triad of medium of exchange, store of value, and unit of account at the global level. The leading currency facilitates a significant portion of cross-border trade, finances international services, and settles external debt obligations. For central banks and governments, the currency serves as a unit for foreign exchange intervention, a reserve asset that sustains confidence and provides a “rainy-day fund” during crises, and a unit of account through which key commodities, such as oil and critical minerals, are priced. 

The rise of a currency to an international status is shaped by a combination of confidence and convenience, the network effects of international financial architectures, economic size, capital account openness, and political risk (Eichengreen 2011; McDowell 2023). China has been adapting to these determinants through a strategy described by Edwin Lun-Cheung Lai (2021) as pursuing a “one currency, two markets” model, designed to reconcile the opportunities of global integration with the risks of full capital liberalization.

Hong Kong holds a central role in this strategy as the leading offshore RMB center and offers entry pathways to the more regulated mainland financial system. Each new infrastructural advancement, including banking networks, clearing centers, the Cross-border Interbank Payment System (CIPS), mBridge, and yuan-denominated commodity futures, has enhanced usability and propelled the RMB’s development in the last ten years. CIPS, for example, offers access to mainland clearing and settlement systems and is open to all foreign institutions. The system facilitates smoother, lower-cost RMB transactions, although all trade is monitored by a unique ID due to stringent regulations. As of 2025, 1690 direct and indirect participants across 121 countries performed transactions with CIPS. 

mBridge, likewise, is an instrument for promoting the international use of the RMB. Through mBridge, an importer in a country can request an e-token from their bank via the project’s blockchain, have the payment credited to the receiving bank's corresponding account within a few seconds, and then convert ot to the desired currency. (Hofman & Petry, 2025). China has also expanded its bond market to become the third-largest globally and has gained entry to major global fixed-income benchmarks, such as the Bloomberg Barclays Global Aggregate Index. At the same time, the expansion, design, and regulatory oversight of RMB-related financial infrastructure ultimately rest with Chinese authorities, who calibrate its evolution to enable the RMB to accrue international value on terms compatible with domestic economic priorities. (Hofman & Petry, 2025)

Future of RMB’s Financial Economy

Although the Western sanctions against Moscow have again resurged the demand for the above Chinese financial frameworks, the Russia case reveals the rather asymmetrical nature of this alignment. The bilateral relationship lacks reciprocity in terms of financial leverage. Russian firms may seek RMB liquidity, whereas Chinese institutions may not seek ruble exposure and won’t be willing to relinquish their dollar earnings. This asymmetry reflects the broader architecture of an emerging RMB-centric bloc, which may entail functional dependence rather than symmetrical integration. China supplies liquidity, infrastructure, and settlement mechanisms, whereas partners supply commodities, markets, or diplomatic alignment. 

China cannot fully commit to deeper engagement with Russia until it has recognised its implications. If the RMB becomes the currency of autarkic states, it risks acquiring a reputational profile that discourages adoption among middle powers. This political risk, which itself is a main driver of the dollar's diminishing dominance, is of importance for RMB’s international status. Association of South East Asian Nations (ASEAN) states, for instance, may have incentives to diversify their currency composition to enhance financial sovereignty and reduce vulnerability to geopolitical headwinds. Much as India seeks autonomy without dependence and Gulf states seek commodity monetisation without political entanglement, a transactional RMB is potentially attractive, but a politically stigmatised RMB is not. The RMB’s adoption in Russia, therefore, serves as an experiment in how RMB can occupy spaces created by the receding dollar, fueled by sanctions and tariffs, and whether, with sufficient critical mass, a chain reaction will follow suit.

For ASEAN and other middle-income states, the relevance of RMB debt markets may lie less in sovereign refinancing and more in corporate issuance and project finance. Offshore RMB markets allow firms engaged in China-facing trade and infrastructure contracts to denominate liabilities in RMB, thereby reducing currency mismatch risk. This complements Belt and Road Initiative financing, where project-level loans are often denominated in RMB. Over time, such project finance could create embeddedness in the RMB market. Diversifying into RMB, even marginally, can also be a form of sovereign expression, asserting the right to transact across multiple monetary corridors. 

Conclusion

With the war in Ukraine nearing its fourth year, amidst the waves of sanctions, halved oil revenues, and  soaring interest rates, the Russian economy precariously continues to run its course, riding the gold reserves and tax hikes to cover the deficit from the now slowing-down war economy. As autonomy and security take the lead role in the Russian economic craft, the Moscow leadership can be said to have learned how to live with the sanctions for the foreseeable future. Since oil prices and purchases decline and higher tax rates fuel political dissent, economic policymakers are seeking alternative sources of funding if the situation worsens. The Chinese renminbi increasingly forms a significant portion of this diversification of borrowing. The private sector in Russia has long utilized Chinese bond markets to expand in mainland China and settle trade in other countries, and the second state’s follow-up reaffirms the role of yuan funding and the government’s, so far, political alignment with Beijing. China’s own limitations and interest impose an upper bound on Russia’s demand for renminbi access, given Chinese firms’ unwillingness to risk secondary sanctions and the state’s own economic logic. In a way, for Beijing, the magnanimity for Russia to utilise the yuan market can be seen as a large-scale experiment for renminbi progress in internationalisation, given the present institutional arrangements and whether further amendments are necessary. Considering that economic independence is paramount, Moscow’s leadership would like to exercise caution on full-out reliance on renminbi financing, the unattractiveness of the ruble and redirected trade relationships, however, renders the Reniminbi as the current only major source of foreign currency choice for Russian reserves and borrowing.

This article represents the views of contributors to STEAR's online digital publication, and not those of STEAR, which takes no institutional positions.

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