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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