China, Russia deepen financial investment and cooperation

[File photo: baidu.com]

Chinese President Xi Jinping embarks today on his sixth tour to Russia since taking office.

Recent years have seen deepening bilateral political and economic ties.

As CRI's Xie Cheng reports, there has been huge progress in financial relations between the two countries.

One of China's four biggest State-owned banks, The Bank of China, opened a branch in Russia in 1993, laying the foundations for future financial cooperation between the two countries.

Since then, the others have followed suit, along with many other commercial banks and insurance companies.

According to the latest statistics, China's commercial banks now have agency and depository relationships with more than 200 Russian banks.

Meanwhile, Russia's second largest bank, VTB Bank, opened a branch in Shanghai in 2008, becoming the first Russian financial institution to be granted a banking license in China.

The Chinese ambassador to Russia, Li Hui, says this year has been a significant one for Sino-Russian financial cooperation.

"The Bank of Russia opened a representative office in Beijing, the RMB clearing bank opened in Moscow, the China Development Bank and the Export-Import Bank of China set up a close working relationship with Russia financial institutions."

At the end of 2010, direct trade was realized between the Chinese currency, the RMB and the Russian Ruble, ensuring the financing liquidity in bilateral trade and curbing exchange rate risks.

In March this year, the RMB clearing bank was launched in Moscow, regarded as a milestone in the internationalization of the Chinese currency.

The Industrial and Commercial Bank of China started Ruble-to-RMB forward transactions this May in Moscow, helping to promote investment in non-export-oriented and infrastructure projects in Russia, by Chinese companies.

Changes have also been seen in the field of bilateral financial cooperation.

Previously, Russian rules stipulated that deposits held in RMB accounts in the Chinese mainland couldn't be counted as current liquidity. This meant Chinese banks weren't allowed to use such deposits to head off regulatory risks. Following intense lobbying by Chinese banks, this rule has now been changed.

Lang Weijie, deputy manager of ICBC Moscow, was part of the process.

"The Bank of Russia finally revised the supervision rules and recognized the deposit of RMB accounts in the Chinese mainland as current liquidity. The policy encourages more Russian institutions to hold RMB. Even those without RMB holdings have expressed a strong wish to hold the Chinese currency."

In the stock markets, ICBC Moscow obtained a broker, trading and custody license last year.

Lang says the license has given ICBC Moscow the qualification as an investment bank.

"ICBC Moscow can help Russian companies seek financing from Hong Kong and other markets, issuing bonds in the Chinese mainland and Hong Kong. We can also help Chinese enterprises looking for investment, to acquire projects and issue bonds in Russia."

In 2015, the Sino-Russia Banking Union was established in China's northeastern city of Harbin. It now has 65 members, and had completed 12.6 billion yuan, around 1.8 billion US dollars, of trans-border financing by 2016.

In March this year, the Russian aluminum producer, UC RUSAL, issued 1 billion yuan worth of panda bonds in China.

These are RMB denominated bonds from a non-Chinese issuer, sold in the People's Republic of China.

The three-year bonds are the first to be issued by a company involved in the China inspired Belt and Road initiative, which brings together countries across Asia, Africa, the Middle East and Europe in economic and cultural cooperation.

Analysts expect the market to expand as China pushes the internationalization of its currency.