China and Russia Move to Settle Bilateral Trade in Yuan and Roubles

China and Russia announced on Tuesday that they will settle bilateral trade in their own currencies — the yuan and the rouble — rather than the US dollar. Chinese Premier Wen Jiabao and Russian Prime Minister Vladimir Putin made the announcement at a joint news conference in St. Petersburg.

The mechanics are already moving: the yuan has begun trading against the rouble in China's interbank market, and Russia will soon allow the renminbi to trade against the rouble on its own market. Until now, the two countries conducted nearly all bilateral trade in dollars. Officials on both sides have been exploring alternatives since the financial crisis exposed the risks of relying on a third country's currency.

Chinese analysts framed the move as defensive — protecting domestic economies and reflecting closer Beijing-Moscow ties — rather than as a challenge to the dollar's global role. That framing matters: bilateral trade between the two was a fraction of either country's total, so the immediate economic impact was modest. The symbolism, though, was unmistakable.

The currency announcement came wrapped in a broader package: twelve cooperation documents were signed, covering energy, aviation, railroad construction, customs, intellectual property, and culture. Among them was a pact for China's Tianwan nuclear power plant to purchase two reactors from Russia. The one deal not signed was the big one — Russian gas supplies to China, with the two sides reportedly still about $100 per 1,000 cubic meters apart on price.

Wen declared the partnership had "reached an unprecedented level" and pledged the two countries would "never become each other's enemy." Whether the yuan-rouble settlement grows into a genuine alternative to dollar trade — or remains a symbolic gesture between two neighbors — will depend on whether the money follows the announcements.