Russia Moves toward Greater Use of China’s Currency

The leaders of China and Russia endorsed an expanded role for China’s currency, the renminbi, during a summit in Moscow this week, a step that would tie Russia’s economy closer to China’s.

Buried in the two men’s joint statement on Tuesday was a call for “supporting the expansion of the use of local currency in bilateral trade, investment, credit and other economic and trade activities.” China’s top leader, Xi Jinping, left Moscow on Wednesday after days of meetings with President Vladimir V. Putin of Russia.

Because Russia’s ruble has given way to the renminbi even for some transactions inside Russia, the statement amounted to support for growth in use of the renminbi instead of the dollar. China has sought to expand international usage of its currency for more than a decade, but it remains limited.

The renminbi is difficult to use except for buying goods from China, so selecting the Chinese currency will bind Russia even more tightly to trading with the country.

With most American and European companies exiting Russia after Mr. Putin’s invasion of Ukraine, Chinese companies have been rapidly expanding their role there in industries like the automotive sector.

And broader use of the renminbi would make it easier for companies in China and its allies, like Russia, Iran and North Korea, to conduct international transactions without worrying about financial sanctions linked to using the dollar. It would also help insulate the Chinese economy from interest rate changes and other policy shifts in the United States.

The renminbi might play a gradually increasing role in trade transactions involving China, said Mark Sobel, the U.S. chairman of the Official Monetary and Financial Institutions Forum, a research group that specializes in central banking and economic policy. But globally its role is still small, Mr. Sobel said, “and even if it creeps up, that role should remain highly limited.”

Several issues — including China’s own policies — stand in the currency’s way.

Finding renminbi to use outside China is difficult. Beijing has stringent limits on moving money into and out of the country, mainly to prevent wealthy people from moving their savings elsewhere. China also has tough restrictions on converting renminbi into other currencies and has recently imposed tight controls on its private sector, scaring off many foreign investors.

Unlike the United States, China runs large trade surpluses. While dollars pile up outside the United States as American companies use them to pay for many imports, few renminbi are accumulating outside China.

For fear of incurring sanctions, China’s energy companies have steered clear of increasing their purchases of Russian oil and gas. Small Chinese energy companies have ramped up purchases instead. The statement on Tuesday by Mr. Xi and Mr. Putin increases the pressure on Chinese oil and gas giants, like PetroChina and Sinopec, to do more of their international transactions in renminbi.

These companies have preferred to use dollars because oil and gas are mainly traded in dollars on world markets. Chinese energy companies place big bets on world energy markets to offset possible financial losses on their own oil and gas production if global prices move in unexpected directions.