China Offers to Help Russia and Wean the World Off the Dollar
December 22, 2014
Yahoo! Finance -
It’s been a tough year for
Russia. The sliding ruble, plunging oil prices and economic sanctions
have all cut a swathe through the economy.
China, Russia’s biggest
economic partner is now offering to help. Think of it as an olive branch filled with yuan leaves.
Henry Blodget says this is an
example of the changing global economy:
“The world is realigning. This
is the big picture. China is getting stronger and stronger. Russia is in
trouble.”
Don’t tell that to Russian President Vladimir Putin. Putin
doesn’t consider his country’s current economic state as a crisis and he
remains defiant that the Ruble will bounce back.
China and Russia are both trying to decrease dependence on the U.S.
dollar in international trading. In October, the countries agreed on a
$24 billion currency swap to strengthen the ruble and make trading easier between the two partners.
Perhaps, not looking to offend
Putin, Chinese Foreign Minister Wang Yi says they would only help
Russia, if they needed it and that he believes Russia has the
wherewithal to get out from under its problems. Blodget disagrees and
sees some bumpy roads ahead:
“You’re going to get destabilization. China
and Russia are cozying up. China is playing it both ways. Saying not
too much help here and keeping their options open.”
China and Russia both need each
other. Earlier this year China signed a 30-year $400 billion deal to buy
Russian gas and shore up their energy supplies. Western economic
sanctions placed on Russia after its meddling in the Ukraine have also
forced the country to import more from China. China’s exports to Russia
are up over 10% from last year.
Russia’s struggles are also a
prime opportunity for China to showcase its economic prowess. China’s
buying power and global emergence is altering the global landscape.
“This idea that the U.S. and Europe control the whole world is starting
to change,” says Blodget. Look for China to continue to find ways to
assert its economic power in the coming year.
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