China pledges to help Russia overcome economic hardships

Russia's President Vladimir Putin (L) and his Chinese counterpart Xi Jinping. (AFP Photo/How Hwee Young)
China’s foreign minister has pledged support to Russia as it faces an economic downturn due to sanctions and a drop in oil prices. Boosting trade in yuan is a solution proposed by Beijing’s commerce minister.

Russia has the capability and the wisdom to overcome the existing hardship in the economic situation," Foreign Minister Wang Yi told journalists, China Daily reported Monday. “If the Russian side needs it, we will provide necessary assistance within our capacity."

The offer of help comes as Russians are still recovering from the shock of the ruble’s worst crash in years last Tuesday, when it lost over 20 percent against the US dollar and the euro. The Russian currency bounced back the next day, but it still has lost almost half of its value since March.

At his annual end-of-year press conference on Thursday, Vladimir Putin acknowledged the ruble has been tumbling along with the price of oil, and estimated that Western sanctions account for 25-30 percent of the Russian economic crisis. However, the president’s economic forecast is that the slump will not be a lasting one.

READ MORE: Putin: Russian economy will inevitably bounce back, 2 years in worst case scenario

Chinese Commerce Minister Gao Hucheng proposed on Saturday to expand the use of the yuan in trade with Russia.

Reuters/Carlos Barria

He said the use of the Chinese currency has been increasing for several years but western sanctions on Russia had made the trend more prominent, Reuters cited Hong Kong’s Phoenix TV as saying.

Gao said this year’s trade between China and Russia could reach $100 billion, approximately 10 percent growth compared to last year.

READ MORE: Russia-China trading settlements in yuan increases 800%

The minister said he did not expect cooperation on energy and manufacturing projects with Russia to be greatly affected by the current crisis.

Many Chinese people still view Russia as the big brother, and the two countries are strategically important to each other,” Jin Canrong, Associate Dean of the School of International Studies at Renmin University in Beijing, told Bloomberg. “For the sake of national interests, China should deepen cooperation with Russia when such cooperation is in need.

Gazprom’s Power of Siberia pipeline – to deliver 4 trillion cubic meters of gas to China over 30 years – construction commencing September 2014. (RIA Novosti/Aleksey Nikolskyi)

China has been increasingly seeking deals in its own currency to challenge the US dollar’s dominance on the international market.

READ MORE: Argentina to get $1bn in currency swap with China before end of 2014

And Beijing is not alone in attempts to counter the influence of Western-based lending institutions and the US currency.

BRICS, the group of emerging economies that comprises Brazil, Russia, India, China and South Africa, accounting for one-fifth of global economic output, has been pursuing the same goal. The five nations agreed in July to increase mutual trade in local currencies, and also to create a BRICS Development Bank with investment equivalent to $100 billion as an alternative to the Western-controlled World Bank.