Ukraine to make international payments in yuan

27.06.2012 17:54 "Agro Perspectiva" (Kyiv) — Ukraine and China have agreed to exchange national currencies. This will allow the National Bank of Ukraine to simultaneously increase reserves up to 15 billion yuan ($ 2.36 billion). China will be able to increase its exports to Ukraine as Ukrainian importers can now refuse to purchase dollars on the interbank market and buy yuan from the National Bank. In the prospect, such arrangements can also help increase the flow of Chinese investments in the Ukrainian economy, the experts hope. According to the NBU, on June 26, the National Bank of Ukraine Serhiy Arbuzov signed the first bilateral currency swap agreement with the management of the People’s Bank of China. The essence of monetary transaction is that the National Bank buys 15 billion yuan ($ 2.36 billion) at 19 billion UAH. This agreement is valid for three years and may be extended by mutual agreement of the parties. «The deal is aimed at enhancing bilateral financial cooperation and promoting trade and investment, as well as joint support for regional financial stability,» the People’s Bank of China statement says. It is known that China widely uses the currency-swap mechanism to promote its currency, which is not a freely convertible yet. China has already signed such agreements with more than 20 countries around the world, including Japan, Brazil and Belarus. «For China, the benefits from such arrangements are obvious. The state wants to make yuan a world currency and step by step is achieving this goal,» the director of the Institute for Economics and Forecasting of the National Acadeny of Sciences of Ukraine Valery Geyets said. The swap operation will allow Ukraine to increase the NBU foreign exchange reserves by $ 2.36 billion — up to $ 33.1 billion. The yuan could be used for direct payments between enterprises of both countries, especially if the NBU regularly exhibits bilateral quotations: to buy yuan from exporters and to sell the currency to importers, as it makes with the Australian dollar. «Although yuan is virtually pegged to the dollar, as well as the hryvnia rate is, there are great risks in strengthening the national currency of China. In this case, the contracts in yuan will be profitable under the long-term exports from Ukraine. In other cases, businesses will prefer to focus on a more stable currency,» the executive director of the Blazer International Fund Oleh Ustenko said. Currently, $ 1 is worth 6.36 yuan. By the end of the year is expected to strengthen to 6 yuan. The experts also see an attempt to reduce dependence on Russia in this currency agreement conclusion.

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